Indicate
by check mark if registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes ¨ No þ

Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes ¨ No þ

Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes þ No ¨

Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes ¨ No þ

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in the definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ¨

Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.

Certain statements in this annual
report on Form 10-K contain or may contain forward-looking statements that are
subject to known and unknown risks, uncertainties and other factors which may
cause actual results, performance or achievements to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. These forward-looking statements were based on
various factors and were derived utilizing numerous assumptions and other
factors that could cause the Company's actual results to differ materially from
those in the forward-looking statements. These factors include, but are not
limited to, economic, political and market conditions and fluctuations,
government and industry regulation, interest rate risk, U.S. and global
competition, and other factors. Most of these factors are difficult to predict
accurately and are generally beyond the Company's control. You should consider
the areas of risk described in connection with any forward-looking statements
that may be made herein. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of this
report. Readers should carefully review this report in its entirety, including
but not limited to the financial statements and the notes thereto. Except for
our ongoing obligations to disclose material information under the Federal
securities laws, the Company undertakes no obligation to release publicly any
revisions to any forward-looking statements, to report events or to report the
occurrence of unanticipated events.

When used in this yearly report, the
terms the "Company" "Quamtel," “we," "our," and "us" refers to Quamtel, Inc. a
Nevada corporation.

All share and per share information
contained in this annual report gives effect to the 1 for 20 (1:20) reverse
stock split effective June 22, 2007, and the 1 for 10 (1:10) reverse stock split
effective September 8, 2009.

PART
I

ITEM 1.
BUSINESS

Unless otherwise indicated or the
context otherwise requires, the terms “Company,” “we,” “us” and “our” herein
refer to the Registrant and WQN, after giving effect to the Merger (as defined
below).

The
Registrant Quamtel, Inc., formerly known as Atomic Guppy, Inc., was incorporated
on November 16, 1999 under the laws of the State of Nevada. On
July 28, 2009, the Registrant and WQN, Inc., a Texas corporation (“WQN”)
consummated a Share Exchange Agreement (the “Merger”), pursuant to which the
shareholders of WQN received a total of 15,000,000 shares of Common Stock. As a
result of the Merger, the shareholders of WQN owned approximately 91% of the
then outstanding Common Stock of the Registrant, and WQN became a wholly-owned
subsidiary of the Registrant, through which its primary operations are now
conducted.

In
conjunction with closing the Merger, certain outstanding obligations of the
Registrant including officers and director’s compensation, notes and amounts
payable to officers and directors and third party loans outstanding were
exchanged for 1,275,000 shares of the Registrant’s common stock.

WQN was
formed as a Texas corporation in June 2007. The Company’s principal office
is located at 14911 Quorum Drive, Suite 140 Dallas, Texas 75254, and its
telephone number is 972-361-1980.

The
Company provides prepaid and postpaid enhanced telecommunications services with
an emphasis on transporting calls that originate from the United States and
Canada and terminate to specific regions of the world. Customers utilize WQN’s
Voice Over Internet Protocol (“VoIP”) network to place quality international
calls at discounted rates. The voice quality of WQN’s VoIP calls is virtually
the same as an international telephone call carried over a traditional telephone
line. A substantial portion of WQN’s revenue is derived from the sale of prepaid
service to customers calling from the United States to India. WQN’s products and
services are provisioned and sold online via its websites.

The
Company’s primary products are international prepaid calling services, primarily
marketed as EasyTalk. WQN focuses on quality and convenience features for
consumers and believes that EasyTalk is a step beyond the traditional calling
cards consumers typically use to place low cost international calls. WQN’s
network is securely integrated with its websites and provides customers with
instant activation and immediate access to the service, eliminating the need to
use a PIN or switch long distance carriers. Through automatic number
identification recognition, WQN systematically recognizes the telephone numbers
customers register during the online sign up process. EasyTalk consumer features
include 24 hour online and over the phone recharge, speed dial, PINless dialing
and online access to account balance, call history and purchase history. Due to
the high cost of placing international calls directly from a cell phone, a
growing number of WQN’s customers register their cell phones with the service to
place low cost international calls. WQN plans to continue to focus on the
development of online and mobile applications to leverage a broader base of cell
phone subscribers with a need to quickly and conveniently place low cost
international calls from their cell phones. As of December 31, 2009 WQN had
approximately 7,763 prepaid calling card customers including EasyTalk customers.
Revenues generated from these product offerings amounted to approximately
$2.2 million for the year ended December 31, 2009.

The
Company’s consumer based broadband Internet telephony product, RocketVoIP,
allows customers to place unlimited local, long distance and international calls
using their high-speed Internet connection. Included in RocketVoIP’s monthly
service fee are features such as caller ID, call waiting, call forwarding and
enhanced voice mail. RocketVoIP customers have the option to use their cell
phone to make local, long distance and international calls using the plan’s
included minutes. As of December 31, 2009 WQN had approximately 611 Rocket VoIP
customers, and revenues generated for this product offering amounted to
approximately $210,000 for the year ended
December 31, 2009.

The
Company’s enhanced personal toll free service, My800Online, allows customers to
obtain a toll free number and route it to any home, business or cell phone
number in the world. Using My800Online’s account management interface, customers
can change the number their personal toll free number is routed to and view
their call detail records and billing history online. The Company is currently
expanding My800Online to include virtual office features such as auto attendant,
faxing, personalized greetings and enhanced voice mail to cater to the needs of
small business owners on a tight budget. Approximately $30,000 of revenues were
generated for this product in 2009.

1

Effective
September 30, 2009, the Company acquired the URL 800.com for $250,000 cash
plus 25,000 of its common shares. In December 2009, the Company
acquired the URL DataJack.com for $30,000 cash plus the commitment to issue
10,000 of its common shares in 2010. A marketing plan for these
acquisitions is currently being developed. The DataJack.com and 800.com URLs are
together referred to as the “Domain Names.”

On
December 9, 2009, the Company acquired all of the outstanding membership
interests of Mobile Internet Devices, LLC, a Florida limited liability (“Mobile
Devices”), for a combination of common stock, stock warrants, and a royalty
based on future earnings and new subscribers of the acquired
company. Mobile devices was subsequently renamed and reorganized as
Data Jack, Inc., a Texas corporation (“Data Jack”). Data Jack was formed in
February 2009, and its revenues prior to the Company’s acquisition were
$96,113. Data Jack specializes in delivering nationwide mobile 3G
data coverage for a competitive fixed monthly price, through a proprietary USB
device connected to any computer with a Windows or Mac operating
system.

Our sales
and marketing strategy includes the use of the following internet-based
approaches:

The
Company’s websites are accessible 24 hours a day, seven days a week. The
websites can be accessed from any location where a connection to the Internet is
available, eliminating the need to physically travel to another location to make
a purchase and receive delivery. WQN’s websites include the
following:

www.wqn.com

www.RocketVoIP.com

www.1800TalkTime.com

www.DataJack.com

www.800.com

www.MyWQN.com

www.ValuecomOnline.com

www.My800Online.com

www.SuperTel.com

Competition

We
compete in the retail prepaid calling services market and the consumer broadband
Internet telephony market. Many of our competitors are substantially larger and
have greater financial, technical, engineering, customer support and marketing
resources, longer operating histories, greater name recognition and larger
customer bases than we do. Many of our competitors enjoy economies of scale that
can result in lower cost structure for transmission and related costs that could
cause significant pricing pressures. Our online presence is in direct
competition with other online sellers of prepaid calling and broadband Internet
telephony services. Many of our competitors also sell comparable products in
physical form in retail stores. Although the market for these services is highly
competitive, we believe we can compete effectively because of our experience in
the online distribution of products and services, the speed in which we can
bring enhanced services and features to market, and our continued focus on
quality at a competitive price. Collectively, these advantages represent a
competitive advantage that we expect will allow us to expand both in volume and
profit margins.

Regulation

International
Services

The
Company’s international services are regulated by the Federal Communications
Commission (“FCC”). The FCC’s regulations distinguish between dominant and
non-dominant providers of international services. The Company is considered a
non-dominant provider of international services. As such, it is subject to
minimal regulation and oversight.

2

The
Company is also subject to certain minimal annual reporting requirements for its
international operations and must pay annual regulatory fees and contribute to
various federal funds including the federal Telecommunications Relay Fund
(“TRS”). In addition, the Company must contribute to the funding of the North
American Numbering Plan (“NANPA”) and Local Number Portability (“LNPA”)
Administrators. The Company is entitled to recover all of these contributions
and fees from its customers, either through direct surcharges or as part of its
rates. The Company has made, or is in the process of making, the necessary
federal filings, has paid the required fees and believes it is in compliance
with all applicable requirements.

While the
Company must file reports with the FCC for the federal Universal Service Fund
(“USF”), the Company’s international operations are generally not subject to a
contribution obligation. This is because of the FCC’s Limited International
Revenue Exemption (“LIRE”). Under the LIRE, contributors whose interstate
revenues comprise less than twelve percent of their combined interstate and
international revenues only contribute based on their interstate revenues.
However, if the Company’s VoIP operations (see below) grow substantially, the
Company may no longer be subject to the LIRE and may be required to contribute
to the fund based on its international revenues. However, the Company is
entitled to recover its USF contributions from its customers, either through
direct surcharges or as part of its rates.

As a
non-dominant carrier, the Company is not required to file a tariff for its
services and its rates are not regulated by the FCC. The FCC also does not have
rules governing the provision of international prepaid services. However, the
Company is required to post its rates on its Internet website and maintain
records for a specified period of time in order to respond to customer
inquiries. The Company is in compliance with these requirements.

As an
international provider, the Company is not subject to regulation by any of the
state public utility commissions. However, in some states the Company’s prepaid
operations may be subject to statutory provisions enforced by the Attorney
General or other state agency enforcing consumer protection standards relating
to the issuance of prepaid cards, the establishment of prepaid accounts, and
disclosures associated with prepaid cards and accounts. The Company believes
that its general operating procedures already comply with most of these
requirements and that, should it become subject to such requirements, the impact
on the Company’s business will be minimal.

Voice
Over Internet Protocol (VoIP) Services

The
Company’s VoIP services utilize cutting edge technology, the regulatory status
of which has not been definitively determined. Specifically, the FCC has not yet
determined if the service is an unregulated information service or a regulated
telecommunications service. An FCC rulemaking proceeding to identify how various
types of IP-enabled service, including VoIP, should be classified and regulated
has been pending since 2004.

Starting
in 2005, the FCC singled out one particular type of VoIP service, which it calls
interconnected VoIP service, for various types of non-rate regulation.
Interconnected VoIP service is defined as a service that (1) enables real-time,
two-way voice communications; (2) requires a broadband connection from the
user's location; (3) requires IP-compatible CPE; and (4) permits users generally
to receive calls that originate on the PSTN and to terminate calls to the PSTN.
This definition fits the type of service that the Company currently
provides.

Generally
speaking, the FCC views this service as a substitute for traditional telephone
service. While not ruling definitively as to whether this service is a
telecommunications service, the FCC has imposed various operational obligations
on providers of interconnected VoIP service. This includes: providing enhanced
911 (E911) capabilities as a standard feature of all interconnected VoIP and
making certain customer disclosures; complying with the requirements of the
Communications Assistance for Law Enforcement Act (CALEA); and complying with
the FCC’s telecommunications relay service, disability access, Customer
Proprietary Network Information (CPNI), and local number portability rules that
currently apply to telecommunications carriers. The FCC has not required the
filing of tariffs for interconnected VoIP service and does not regulate the
rates and charges for such services. The Company believes it is currently in
compliance with these operational requirements.

The FCC
has also imposed various financial and other reporting requirements on
interconnected VoIP providers. This includes registration, annual local
competition and broadband reporting, and the filing of annual CPNI statements.
In addition, interconnected VoIP providers must report their revenues and
contribute to the USF, TRS, NANPA, and LNPA funding mechanisms and pay
regulatory fees. The Company is entitled to recover all of these fees from its
customers, either through direct surcharges or as part of its rates. The Company
believes it is currently in compliance with these reporting and financial
requirements.

3

The FCC
had not yet ruled definitively on whether access charges apply to traffic that
originates and/or terminates to interconnected VoIP networks. The imposition of
such charges may affect the underlying costs of the Company’s service but the
Company does not anticipate that it will have an adverse impact on the Company’s
business prospects. First, all competitors will be subject to the same
requirements, ensuring a level playing field. In addition, if the Company is
allowed to asses originating access charges on calls which originate from its
customer base and terminate to other carriers, the Company will recognize a new
revenue stream not currently available to it.

Since the
regulatory status of VoIP service has not been definitively determined, it is
possible that additional regulation will be applied to the Company in the
future. However, even if the FCC determines that interconnected VoIP services
are telecommunications services, the Company would be considered a non-dominant
carrier and would not be subject to tariff or rate regulation. Significantly,
the FCC has said the interconnected VoIP providers are most similar to wireless
carriers, who are largely unregulated on both the federal and state
levels.

Interconnected
VoIP service has generally not been subject to state public utility commission
regulation. In 2004, the FCC ruled that VoIP services meeting certain
characteristics are interstate in nature and cannot be regulated by the states.
A major reason for the FCC’s decision was the inability of VoIP providers to
identify which calls were completed on an interstate basis and which calls were
completed on an intrastate basis. The preemption will apply to entities who,
like the Company, offer IP-enabled services with these basic characteristics:
(1) the service requires a broadband connection; (2) the service requires
IP-compatible CPE; and (3) the service offering includes a suite of integrated
capabilities and features, able to be invoked sequentially or simultaneously,
that allow customers to manage personal communications dynamically, including
enabling them to originate and receive voice communications and access other
features and capabilities, even video. The FCC’s decision was affirmed by the
Eighth Circuit Court of Appeals. However, the Court left open the possibility
that “If, in the future, advances in technology undermine the central rationale
of the FCC's decision, its preemptive effect may be reexamined.”

Due to
this decision, state commissions have not attempted to regulate the rates,
terms, and conditions of VoIP service. Significantly, state legislatures have
begun to address the proper regulatory treatment of VoIP service and have, in
all cases where the issue was considered, amended the state communications
statute to expressly prohibit the state from regulating the rates, terms, and
conditions of VoIP service. In some cases, state commissions have been given
authority to require the registration (but not certification) of VoIP providers
and to collect state USF, TRS, and similar fees from VoIP providers. In
addition, many states require VoIP providers to collect state 911 (emergency
telephone service) charges and remit those to a state entity. The Company is in
compliance with these registration and remittance requirements in the states in
which it operates. The Company is entitled to recover all of the contributions
and fees it must pay from its customers, either through direct surcharges or as
part of its rates. While additional states may adopt similar requirements in the
future, the Company does not believe that these requirements have, or will have,
a materially adverse impact on its business.

From time
to time, new legislation may be enacted that affects the telecommunications and
VoIP industries and the Company’s business. Additionally, court decisions
interpreting existing laws and rules and regulations applicable to the industry
may also have a significant effect on the Company’s business. There can be no
assurance that the FCC, PUCs, or any other regulatory authorities will not raise
material issues with regard to the Company’s compliance with existing
regulations or that changes to existing laws and regulations or the enactment of
new ones, applicable to the activities of the Company, will not have a material
adverse effect on the Company.

Patents
and Trademarks

The
Company has no patents, and relies on the technical experience of its key
employees, coupled with its existing business relationships to support its
operations. The Company is pursuing selected trademark
applications.

Employees

As of December 31, 2009, the Company
had 17 employees, consisting of 6 in management, 4 in technical support,
and 7 in customer service and administration.

4

ITEM 1A. RISK FACTORS

Before you invest in the Company's
securities, you should be aware that there are various risks. You should
consider carefully these risk factors, together with all of the other
information included in this annual report before you decide to purchase the
Company's securities. If any of the following risks and uncertainties develop
into actual events, the Company's business, financial condition or results of
operations could be materially adversely affected and you could lose your entire
investment in the Company.

Risks Relating to Our
Business

Our
independent registered public accounting firm has expressed substantial doubt
about our ability to continue as a going concern, which may also hinder our
ability to obtain future financing.

In their
report dated March 26, 2010, our independent registered public accounting
firm stated that our financial statements for the year ended December 31,
2009 were prepared assuming that we would continue as a going concern. However,
they expressed substantial doubt about our ability to do so. The Company has
experienced an accumulated loss deficit of $1,930,012 as of December 31,
2009, including a net loss of $1,931,897 for the year ended December 31,
2009. We also had a working capital deficit of $1,330,097 at December 31,
2009 and cash on hand of $94,003. We also expect to incur additional losses for
the first quarter of 2010.

Our
ability to continue as a going concern is subject to our ability to increase
revenues and generate a profit and/or obtain necessary funding from outside
sources, including obtaining additional funding from the sale of our securities,
generating sales, or obtaining financing from various financial institutions
where possible. By adjusting our operations and development to the level of
capitalization, we believe that we have sufficient capital resources to meet
projected near-term cash flow requirements. However, if during that period or
thereafter, we are not successful in generating sufficient liquidity from
operations or in raising sufficient capital resources, on terms acceptable to
us, this could have a material adverse effect on our business, results of
operations, liquidity and financial condition. There can be no assurances that
our efforts will prove successful. The Company's financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.

We
have limited operating history upon which you can evaluate us.

The
Registrant had no operations just prior to the Merger, and WQN has only been in
operation since June 2007 and has incurred substantial operating losses.
Therefore we have very limited operating history upon which you can evaluate our
current business and prospects. You should consider our prospects in light of
the risks, expenses and difficulties we may encounter as an early stage company
a business in the new and rapidly evolving VoIP market.

Our
business depends on the performance and reliability of the computer and
communications systems supporting it. Notwithstanding our current capacity,
heavy use of our computer systems during peak trading times or at times of
unusual market volatility could cause our systems to operate slowly or even to
fail for periods of time. If our systems cannot be expanded successfully to
handle increased demand, or otherwise fail to perform, we could experience
disruptions in service, slower response times, and delays in introducing new
products and services.

Our
systems and operations also are vulnerable to damage or interruption from human
error, natural disasters, power loss, sabotage or terrorism, computer viruses,
intentional acts of vandalism, and similar events. Any system failure that
causes an interruption in service or decreases the responsiveness of our service
could impair our reputation, damage our brand name and negatively impact our
revenues. We also rely on a number of third parties for systems support. Any
interruption in these third-party services or deterioration in the performance
of these services could also be disruptive to our business and have a material
adverse effect on our business, financial condition and operating results. We
cannot predict the likelihood that services provided by third parties may be
interrupted.

5

We
have not voluntarily implemented various corporate governance measures, in the
absence of which, stockholders may have more limited protections against
interested director transactions, conflicts of interest and similar
matters.

Recent
Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in
the adoption of various corporate governance measures designed to promote the
integrity of the corporate management and the securities markets. Some of these
measures have been adopted in response to legal requirements. Others have been
adopted by companies in response to the requirements of national securities
exchanges, such as the NYSE or The Nasdaq Stock Market, on which their
securities are listed. Among the corporate governance measures that are required
under the rules of national securities exchanges are those that address board of
directors' independence, audit committee oversight, and the adoption of a code
of ethics. We have also not adopted a Code of Business Conduct and Ethics nor
have we yet adopted any other corporate governance measures and, since our
securities are not listed on a national securities exchange, we are not required
to do so. We have not adopted corporate governance measures such as an audit or
other independent committees of our Board of Directors. Prospective investors
should bear in mind our current lack of corporate governance measures in
formulating their investment decisions.

Our internal controls over financial
reporting, and our disclosure controls and procedures, are not adequate, and our
independent auditors may not be able to later certify as to their adequacy,
which could have a significant and adverse effect on our business and
reputation.

Section 404
of Sarbanes-Oxley and the rules and regulations of the Securities Exchange
Commission (the “Commission”) associated with Sarbanes-Oxley, which we refer to
as Section 404, require a reporting company to, among other things,
annually review and disclose its internal controls over financial reporting, and
evaluate and disclose changes in its internal controls over financial reporting
quarterly. Under Section 404 a reporting company is required to document
and evaluate such internal controls in order to allow its management to report
on, and its independent auditors to attest to, these controls. We are required
to comply with Section 404 not later than our fiscal year ending
December 2010. As reported in Item 9A(T). Controls and Procedures, we have
concluded that our disclosure controls and procedures, and our financial
reporting controls, are currently ineffective. If we are not able to implement
the requirements of Section 404 in a timely manner or with adequate
compliance, our independent auditors may not be able to certify as to the
effectiveness of our internal control over financial reporting, and we may be
subject to sanctions or investigation by regulatory authorities, such as the
Commission. As a result, there could be an adverse reaction in the financial
markets due to a loss of confidence in the reliability of our financial
statements. In addition, we may be required to incur substantial costs in
improving our internal control system and the hiring of additional personnel.
Any such actions could adversely affect our results of operations, cash flows
and financial condition.

To
protect our intellectual property rights, we rely on a combination of trademark
laws, trade secret protection, confidentiality agreements and other contractual
arrangements with our affiliates, customers, strategic investors and others. The
protective steps we have taken may be inadequate to deter misappropriation of
our proprietary information. We may be unable to detect the unauthorized use of,
or take appropriate steps to enforce, our intellectual property rights. Failure
to protect our intellectual property adequately could harm our brand and affect
our ability to compete effectively. Further, defending our intellectual property
rights could result in the expenditure of significant financial and managerial
resources, which could adversely affect our business, financial condition and
operating results.

Intellectual
property and proprietary rights of others may prevent us from using the
technology necessary to provide our services and may subject us to expensive
intellectual property litigation.

If a
court determines that the technology necessary for us to provide our services
infringes a patent held by another person, and if that person is unwilling to
grant us a license on acceptable terms, we may be ordered not to use the
technology. We may also be ordered to pay significant monetary damages to the
patent-holder. If we are ordered not to use the technology, we may be forced to
cease offering services that depend on such use. In the event that a claim of
infringement is brought against us based on the use or sale of our technology,
or against any of our customers based on the use of our technology which we have
agreed to indemnify our customers against, we may be subject to litigation to
determine whether there is an infringement. Such litigation is expensive and
distracting to our business and operations, regardless of the outcome of the
suit.

If
our fraud prevention methods are not effective, our business, reputation and
financial results may be adversely affected.

We are
susceptible to online cardholder-not-present fraud and call processing fraud. We
control fraud through the use of internally developed proprietary technology and
commercially available licensed technology. Traditional means of controlling
online cardholder-not-present fraud insufficiently controls fraudsters who
obtain personal credit card information and pose as legitimate cardholders. To
address this risk, we have developed automated proprietary as well as
off-the-shelf technology, coupled with in-house staff reviews, to constantly
monitor and block suspicious transactions based on defined criteria. We are also
at risk attempts to hack into our system using various PIN combinations in an
attempt to find a valid account. To address this risk, our system has integrated
fraud detection mechanisms that detect such patterns and block the numbers from
making further attempts. In-house fraud specialists also monitor traffic reports
and usage patterns to identify and investigate suspicious calling patterns.
While we place a high priority on fraud prevention, there is no guarantee that
our measures will be successful in preventing significant fraudulent use of our
network and resources, thereby materially adversely affecting our business,
reputation and financial results.

6

We
depend on key management personnel and the loss of their services could
adversely affect our business.

We rely
substantially on the efforts and abilities of our executive officer Stuart
Ehrlich, and our non-executive staff and consultants. The loss of the services
of any of our key personnel may have a material adverse effect on our business,
operations, revenues or prospects. We also do not maintain key-man life
insurance policies.

Also, we
believe that our future success will depend in large part on our ability to
attract and retain highly skilled, knowledgeable, sophisticated and qualified
managerial, professional and technical personnel. We have experienced
significant competition in attracting and retaining personnel who possess the
skills that we are seeking. As a result of this significant competition, we may
experience a shortage of qualified personnel.

We
must be able to increase the volume of traffic on our network to become
profitable.

Certain
aspects of our business depend on the increased volume of traffic on our
network. In order to realize our targets for sales and revenue growth, cash
flow, operating efficiencies and other network benefits, we must continue to
increase the volume of Internet, data, voice and video transmissions on our
communications network at acceptable prices. If we do not maintain or improve
our current relationship with existing customers and develop new large-volume
and enterprise customers, we may not be able to substantially increase traffic
on our network. The failure to increase network traffic would adversely affect
our ability to become profitable.

Our
business depends on our ability to continue to develop effective business
support systems, and the failure to do so would have a negative effect on our
achievement of financial goals and objectives.

Developing
effective business support systems is a complicated undertaking requiring
significant resources and expertise and support from third-party vendors.
Business support systems are needed to:

·

implement
customer orders for services;

·

provision,
install and deliver these services;
and

·

bill
monthly for these services.

Because
our business provides for continued rapid growth in our number of customers and
our volume of services we offer, we need to continue to develop our business
support systems on an accelerated schedule. Our failure to continue to develop
effective business support systems and meet proposed service rollout dates would
materially adversely affect our ability to implement our plans for growth and
meet our financial goals and objectives.

Termination
of relationships with key suppliers could cause delay and increased costs which
may adversely affect our business.

Our
business is dependent on third-party suppliers for computers, software,
transmission electronics and related components that are integrated into our
network. If any of these relationships is terminated or a supplier fails to
provide reliable services or equipment and we are unable to reach suitable
alternative arrangements quickly, we may experience significant additional
costs. If that happens, our business may be materially adversely
affected.

We
may lose customers if we experience system failures that significantly disrupt
the availability and quality of the services that we provide.

Our
operations depend on our ability to avoid and mitigate interruptions in service.
It is possible that we may experience a failure of the equipment or facility on
our network could result in a significant interruption. Our network is subject
to a number of events that could affect its ability to transfer information,
including power outages, security breaches and computer viruses. Many of these
events may be due to forces beyond our control, such as weather conditions,
natural disasters and terrorist attacks. As a result, our network may experience
information delays or require costly modifications that could interrupt service
to our customers or significantly harm our business.

7

Interruptions
in service undermine consumer confidence in our services and affect our ability
to retain existing customers and attract new ones. Also, because many of our
services are critical to our customers’ businesses, any interruption will result
in loss to our customers. Although we disclaim liability for loss arising from
interruptions in service beyond our control in our service agreements, a court
may not enforce such limitations. As a result, we may be exposed to financial
loss if a court orders us to pay monetary damages.

We
have generated substantial losses, which we expect will continue.

The
development of our communications business has required, and may continue to
require, significant expenditures. These expenditures may result in substantial
negative cash flow from operating activities and substantial net losses in the
near future. We may continue to experience losses and may not be able to achieve
or sustain operating profitability in the future. Continued operating losses may
limit our ability to obtain the cash needed to expand our network, make interest
and principal payments on our debt and fund our other business
needs.

Risks Related to Our
Industry

If
we are unable to fund the expansion and adaptation of our network to stay
competitive in the communications industry, our business would be adversely
affected.

The
communications industry is subject to rapid and significant changes in
technology. In addition, the introduction of new services and technologies, as
well as further development of existing services and technologies, may reduce
the cost or increase the supply of those we provide. As a result, our most
significant competitors in the future may be new entrants to the communications
industry. These new entrants may not be burdened by an installed base of
outdated equipment and may be better able to respond to the demands of our
industry, such as:

·

growing
number of customers;

·

development
and launching of new services;

·

increased
demands by customers to transmit larger amounts of
data;

·

changes
in customers’ service requirements;

·

technological
advances by competitors; and

·

governmental
regulations.

In order
to stay competitive in our industry we must expand and adapt our network
according to these demands. This will require substantial additional financial,
operational and managerial resources, which may not be available when needed. If
we are unable to fund the expansion or adaptation of our network quickly and at
a commercially reasonable cost, our business would be materially adversely
affected.

Failure
to complete development, testing and introduction of new services, including
VoIP services, could negatively affect our ability to compete in the industry.

We
continuously develop, test and introduce new communications services that are
delivered over our communications network. These new services are intended to
allow us to address new segments of the communications marketplace and to
compete for additional customers. In certain instances, the introduction of new
services requires the successful development of new technology. To the extent
that upgrades of existing technology are required for the introduction of new
services, the success of these upgrades may depend on successful dealings with
our vendors and on our vendors fulfilling their obligations in a timely manner.
If we are not able to successfully complete the development and introduction of
new services in a timely manner, our business could be materially adversely
affected.

In
addition, new service offerings may not be widely accepted by our customers. If
our new service offerings are not widely accepted by our customers, we may
discontinue those services and impair any assets or information technology used
to develop or offer them.

The
prices we charge for our communications services may decrease over time
resulting in lost revenue.

Over the
past few years the prices telecommunications providers have been able to charge
for certain services have decreased. This decrease results from downward market
pressure and other factors, including:

·

increased
transmission capacity by telecommunications companies on their existing
and new networks;

·

customer
agreements containing volume-based pricing or other contractually agreed
upon price decreases during the term of the agreement;
and

·

technological
advances or otherwise.

8

If we are
unable to increase traffic volume through additional services and derive
additional revenue as prices decrease, our operating results would decline.
Declining operating results may lead to lost revenue.

The
success of our VoIP services depends on the public acceptance of VoIP telephony
and there is no guarantee that our VoIP services will garner broad market
appeal.

The
success of our Voice over Internet Protocol (or VoIP) services depends on future
demand for VoIP telephony services in general in the marketplace. In order for
the IP telephony market to continue to grow, several industry developments must
take place, including:

·

telephone
and cable service providers continuing to invest in the deployment of high
speed broadband networks to residential and commercial
customers;

·

VoIP
networks continuing to improve quality of service for real-time
communications, managing effects such as packet jitter, packet loss and
unreliable bandwidth, so that toll-quality service can be
provided;

·

VoIP
telephony equipment and services achieving a similar level of reliability
that users of the public switched telephone network have come to expect
from their telephone service, including emergency calling features and
capabilities; and

·

VoIP
telephony service providers offering cost and feature benefits to their
customers that are sufficient to cause the customers to switch from
traditional telephony service
providers.

If any or
all of these developments fail to occur, our VoIP services business may not
continue or grow as expected.

In
addition, our VoIP services are a relatively new offering and we have limited
experience implementing the related programs. As a result, we may encounter many
difficulties, including regulatory hurdles, technological issues, intellectual
property matters, developmental constraints and other problems that we may not
anticipate. We can provide no assurances that we will be successful in
generating significant VoIP revenues.

We
are subject to significant regulation which may adversely affect our business
and profitability.

The
telecommunications industry is subject to significant regulation at the
national, state, local and international levels. These regulations affect our
business and our existing and potential competitors. Obtaining required
regulatory approvals, including those related to acquisitions or financing
activities, performing under agreements with local carriers or the enactment of
adverse regulation may have a material adverse effect on our business. In
addition, future legislative and judicial actions could have a material adverse
effect on our business.

Federal
legislation provides for a significant deregulation of the U.S.
telecommunications industry, including the local exchange, long distance and
cable television industries. This legislation remains subject to judicial review
and additional Federal Communications Commission (or FCC) rulemaking. As a
result, we cannot predict the legislation’s effect on our future operations.
Many regulatory actions are under way or are being contemplated by federal and
state authorities regarding important items. These actions could have a material
adverse effect on our business.

The FCC
has, to date, treated Internet service providers as enhanced service providers.
In addition, Congress has not, to date, sought to heavily regulate intellectual
property (or IP) based services. Both Congress and the FCC are considering
proposals that involve greater regulation of IP-based service providers.
Depending on the content and scope of proposed legislation, the imposition of
new regulations could have a material adverse effect on our business and the
profitability of our services.

9

Increased
scrutiny of financial disclosure, particularly in the telecommunications
industry, may adversely affect our investor confidence and any restatement of
earnings may increase litigation risk and limit our ability to access the
capital markets.

Congress,
the SEC, other regulatory authorities and the media pay very close attention to
financial reporting practices. Particular attention has been focused on the
telecommunications industry and companies’ interpretations of generally accepted
accounting principles. If we were required to restate our financial statements
as a result of a determination that we had incorrectly applied generally
accepted accounting principles, that restatement could adversely affect our
ability to access the capital markets or the trading price of our securities.
The recent scrutiny regarding financial reporting has also resulted in an
increase in litigation in the telecommunications industry. There can be no
assurance that any such litigation against us would not materially adversely
affect our business or the trading price of our securities.

Our
ability to withstand competition in the telecommunications industry may be
impeded by participants with greater resources and a greater number of existing
customers.

The
telecommunications industry is highly competitive. Many of our existing and
potential competitors have resources that are significantly greater than ours
with respect to finances, personnel, marketing and other business aspects. Many
of these competitors have the added advantage of a larger existing customer
base. In addition, significant new competition could arise as a result
of:

·

the
consolidation in the industry led by AT&T and Verizon in the United
States;

·

allowing
foreign carriers to compete in the U.S.
market;

·

further
technological advances; and

·

further
deregulation and other regulatory
initiatives.

If we are
unable to compete successfully, our business could be significantly
harmed.

Risks Related To Our Common
Stock

Our
common stock is subject to the "penny stock" rules of the SEC and the trading
market in our securities is limited, which makes transactions in our stock
cumbersome and may reduce the value of an investment in our stock.

The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes
the definition of a "penny stock," for the purposes relevant to us, as any
equity security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules
require:

·

that
a broker or dealer approve a person's account for transactions in penny
stocks; and

·

the
broker or dealer receive from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to
be purchased.

In order
to approve a person's account for transactions in penny stocks, the broker or
dealer must:

·

obtain
financial information and investment experience and objectives of the
person; and

·

make
a reasonable determination that the transactions in penny stocks are
suitable for that person and the person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks.

The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the Commission relating to the penny stock
market, which, in highlight form:

·

sets
forth the basis on which the broker or dealer made the suitability
determination; and

·

that
the broker or dealer received a signed, written agreement from the
investor prior to the transaction.

Generally,
brokers may be less willing to execute transactions in securities subject to the
"penny stock" rules. This may make it more difficult for investors to dispose of
our common stock and cause a decline in the market value of our
stock.

Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.

Provisions
of our articles of incorporation and bylaws may delay or prevent a take-over
which may not be in the best interests of our stockholders.

Provisions
of our articles of incorporation and bylaws may be deemed to have anti-takeover
effects, which include when and by whom special meetings of our stockholders may
be called, and may delay, defer or prevent a takeover attempt. In addition,
certain provisions of the Nevada Revised Statutes also may be deemed to have
certain anti-takeover effects which include that control of shares acquired in
excess of certain specified thresholds will not possess any voting rights unless
these voting rights are approved by a majority of a corporation's disinterested
stockholders.

Our
common stock could be removed from quotation on the OTCBB if we fail to timely
file our annual or quarterly reports. If our common stock was no
longer eligible for quotation on the OTCBB, the liquidity of our stock may be
further adversely impacted.

10

Under the
rules of the Securities and Exchange Commission we are required to file our
quarterly reports within 45 days from the end of the fiscal quarter and our
annual report within 90 days from the end of our fiscal year. Under rules
adopted by the Financial Industry Regulatory Authority (FINRA) in 2005 which is
informally known as the "Three Strikes Rule", a FINRA member is prohibited from
quoting securities of an OTCBB issuer such as our company if the issuer either
fails to timely file these reports or is otherwise delinquent in the filing
requirements three times in the prior two year period or if the issuer's common
stock has been removed from quotation on the OTCBB twice in that two year
period.

Volatility
of our stock price could adversely affect stockholders.

The
market price of our common stock could fluctuate significantly as a result
of:

·

quarterly
variations in our operating
results;

·

interest
rate changes;

·

changes
in the market’s expectations about our operating
results;

·

our
operating results failing to meet the expectation of investors in a
particular period;

·

operating
and stock price performance of other companies that investors deem
comparable to us;

·

news
reports relating to trends in our
markets;

·

changes
in laws and regulations affecting our
business;

·

material
announcements by us or our
competitors;

·

sales
of substantial amounts of common stock by our directors, executive
officers or significant stockholders or the perception that such sales
could occur; and

·

general
economic and political conditions such as recessions and acts of war or
terrorism.

Fluctuations
in the price of our common stock could contribute to the loss of all or part of
an investor’s investment in the company.

We
may never issue dividends.

We
currently do not plan to declare dividends on our common stock in the
foreseeable future. Any payment of cash dividends will depend upon our financial
condition, capital requirements, earnings and other factors deemed relevant by
our board of directors. Agreements governing future indebtedness will likely
contain similar restrictions on our ability to pay cash dividends. See “Dividend
Policy” for more information. Consequently, an investor’s only opportunity to
achieve a return on investment will be if the market price of our common stock
appreciates and the shares are sold for a profit.

Additional
issuances of equity securities by us would dilute the ownership of our existing
stockholders

As more
fully described in our consolidated statement of changes in stockholders’ equity
in Item 8, we issued 2,190,000 shares of common stock in 2009, and also issued
warrants to purchase 1,054,000 common shares also in 2009. We will continue to
so issue additional equity securities pursuant to certain strategic
transactions, to fund expansion of our operations or for other purposes. We may
issue shares of our common stock in the future for consideration that is greater
than or less than the prevailing market price. To the extent we issue additional
equity securities, our shareholders’ ownership percentage may be reduced,
perhaps substantially.

In conjunction with the Data Jack, Inc.
acquisition more fully described in Note C to the consolidated financial
statements in Item 8, additional shares of the Registrant’s common stock are to
be issued to the sellers on June 30, 2011, such that the original grant of
1,500,000 shares plus the additional shares shall have a market value of at
least $1,500,000, as determined by the average closing prices of the common
stock during the month of June 2011. In addition, at such time as the
number of active subscribers for the services of the Data Jack business being
conveyed to Purchaser under this Agreement shall reach 100,000 subscribers,
Registrant shall issue additional shares of its common stock to the sellers such
that the total shares issued to the sellers under the acquisition agreement
shall be equal to 20% of the issued and outstanding common stock of the
Registrant.

ITEM 1B. UNRESOLVED
STAFF COMMENTS

Not applicable.

ITEM 2.
PROPERTIES

The
Company’s principal office is located at 14911 Quorum Drive, Suite 140 Dallas,
Texas 75254. The Company leases approximately 3,124 square feet of office space,
which lease expires in February, 2015. The Company no longer subleases a portion
of these premises. On March 1, 2010 the Company also began leasing approximately
2,887 square feet of office space located at 6365 NW 5th Way,
Fort Lauderdale, Florida 33309. This lease expires in February, 2013.
The monthly rental and sublease portion on these leases are as
follows:

11

Location

Lease
Expires

Aggregate
Monthly Installment of Base Rent

Sublessee
Portion per Month

Dallas,
Texas

February
28, 2015

$

5,154

$

-

Ft.
Lauderdale, FL

February
28, 2013

$

2,566

(1

)

$

-

(1) The
monthly base rent increases annually from $1,925 in the first year, to
$3,128 in the third year.

ITEM 3. LEGAL
PROCEEDINGS

From time to time, we may become
involved in various lawsuits and legal proceedings which arise in the ordinary
course of business. However, litigation is subject to inherent uncertainties,
and an adverse result in these or other matters may arise from time to time that
may harm our business. We are currently not aware of any such legal proceedings
or claims that we believe will have, individually or in the aggregate, a
material adverse affect on our business, financial condition or operating
results.

ITEM 4. SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS

An
Information Statement and a Notice of Action Taken Without a Meeting were
furnished by the Company’s Board of Directors to the holders of our common stock
at August 10, 2009 (the “Record Date”) in connection with the following
matters:

·

The
filing of the Amended and Restated Articles of Incorporation, included by
reference in Exhibit 3.1 to this Form 10-K, which (i) changed the name of
the Company to Quamtel, Inc., and (ii) recapitalized our capital
structure by effecting (a) a one-for-ten reverse split of our common
stock, such that one new share of our common stock was issued for every
ten shares of existing common stock, and (b) increased the aggregate
number of shares that we have the authority to issue to 250,000,000
post-reverse split shares, of which 200,000,000 shares are shares of
common stock and 50,000,000 shares are shares of preferred stock;
and

·

The
adoption of the Company’s 2009 Equity Incentive Plan, included by
reference in Exhibit 4.1 to this Form
10-K.

Pursuant
to Section 78.320 of the Nevada Revised Statutes, any action that may be
taken at any annual or special meeting of the stockholders may be taken without
a meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, is signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted. Our Board obtained the required approval for the
Amendment and the Plan by means of a written consent of stockholders effective
September 8, 2009. A meeting to approve the Amendment and the Plan was
therefore unnecessary, and our Board decided to forego the expense of having
one.

As
described in the Company’s Form 8-K filed on December 14, 2009, following the
closing of the Data Jack acquisition, on December 9, 2009, Keith R. Jones
was elected to become a member of the Registrant’s Board of
Directors.

On
December 30, 2009, Registrant’s Board of Directors created an additional
Board seat and elected Robert Picow to fill such position. Mr. Picow was
also named as the Chairman of the Board of Directors. Mr. Picow will become
a consultant to the Company and will devote substantial time on its behalf in
the areas of strategic planning, mobile industry expertise, contract
negotiations and international business development. The details of a consulting
agreement are being negotiated.

On March
16, 2010, Mr. Keith Jones submitted his resignation from Registrant’s Board of
Directors, effective March 17, 2010. The Company will seek to fill
the seat with an independent director with industry experience, and will
actively recruit additional independent directors.

The Company's common stock is quoted on
the OTCBB under the symbol QUMI. The stock is very thinly traded and the market
could be considered illiquid. The following quotations reflect the high and low
bid prices for our common stock at the close of each fiscal quarter within the
last two fiscal years, without retail mark-up, mark-down or commission and may
not represent actual transactions:

Quarter
Ended

High

Low

3/31/08

$

2.53

$

0.30

6/30/08

$

0.30

$

0.20

9/30/08

$

0.25

$

0.10

12/31/08

$

5.00

$

0.02

3/31/09

$

4.00

$

0.10

6/30/09

$

4.90

$

1.00

9/30/09

$

3.00

$

1.00

12/31/09

$

2.71

$

1.06

Holders

As of February 28, 2010, there were
approximately 90 shareholders of record.

Dividends

No
dividends have been paid the last two fiscal years. We have no
current plans to pay any future cash dividends on the common stock. Instead, we
intend to retain all earnings, other than those required to be paid to the
holders of any preferred stock we may issue in the future, to support our
operations and future growth. The payment of any future dividends on the common
stock will be determined by the board of directors based upon our earnings,
financial condition and cash requirements; possible restrictions in future
financing agreements, if any; business conditions; and such other factors deemed
relevant.

Securities
Authorized for Issuance under Equity Compensation Plans

The Company’s 2009 Equity Incentive
Plan (the “Plan”) allows for the
issuance of options to purchase up to 5,000,000 shares of the Company’s common
stock to selected employees, outside directors and consultants of Quamtel, Inc.,
at the sole discretion of, and with terms determined by, the Company’s board of
directors. No such options were issued through December 31, 2009.

Recent
Sales of Unregistered Securities; Use of Proceeds from Registered
Securities

On
December 9, 2009, 1,500,000 common shares were issued to Data Jack, Inc., a
Florida corporation owned by Keith R. Jones, and Schooner Enterprises, Inc., a
Nevada corporation owned by John W. Richardson, to acquire all of the
outstanding membership interests of Mobile Internet Devices, LLC, a Florida
limited liability company, which was subsequently reorganized into Data Jack,
Inc., a Texas corporation.

On
December 29, 2009, 100,000 shares of the Company’s common stock were issued to
two investors for $100,000 cash.

13

All of these issuances were exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933 on the
basis of the sophistication and small number of purchasers, and the restrictions
placed on the certificates representing the shares and the representation
received from the purchasers.

Management’s
Discussion and Analysis contains various “forward looking statements” within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), regarding future events or the future financial
performance of the Company that involve risks and uncertainties. Certain
statements included in this Form 10-Q, including, without limitation,
statements related to anticipated cash flow sources and uses, and words
including but not limited to “anticipates”, “believes”, “plans”, “expects”,
“future” and similar statements or expressions, identify forward looking
statements. Any forward-looking statements herein are subject to certain risks
and uncertainties in the Company’s business, including but not limited to,
reliance on key customers and competition in its markets, market demand, product
performance, technological developments, maintenance of relationships with key
suppliers, difficulties of hiring or retaining key personnel and any changes in
current accounting rules, all of which may be beyond the control of the Company.
The Company’s actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including those
set forth therein.

Management’s
Discussion and Analysis of Financial Condition and Results of Operations
(“MD&A”) should be read in conjunction with the financial statements
included herein.

On
January 13, 2009, Quamtel, Inc. (formerly Atomic Guppy, Inc.) (“Quamtel”)
and WQN, Inc., a Texas corporation (“WQN”) (individually and collectively also
referred to as the “Company”) executed a Share Exchange Agreement (the “Share
Exchange Agreement”), pursuant to which the shareholders of WQN were entitled to
receive a total of 15,000,000 post-split shares of Common Stock. All conditions
for closing were satisfied or waived, and the transaction closed on
July 28, 2009.As a result of the
Exchange, the shareholders of WQN own approximately 91% of the outstanding
Common Stock of Quamtel. In conjunction with closing the Share Exchange
Agreement, certain outstanding obligations of Quamtel including officers and
director’s compensation, notes and amounts payable to officers and directors and
third party loans outstanding, were exchanged for 1,275,000 post-split shares of
Quamtel’s common stock.

As a
result of the Share Exchange Agreement, WQN became a wholly-owned subsidiary of
Quamtel, through which its operations will be conducted. On September 8,
2009, Quamtel filed an amendment to its Articles of Incorporation concluding a
one-for-ten reverse split of its common stock, and increasing its authorized
stock to 200,000,000 common shares and 50,000,000 preferred shares.

On
December 9, 2009, the Company acquired all of the
outstanding membership interests of Mobile Internet Devices, LLC, a
Florida limited liability (“Mobile Devices”), for a combination of common stock,
stock warrants, and a royalty based on future earnings and new subscribers of
the acquired company. Mobile Devices was subsequently renamed and
reorganized as Data Jack, Inc., a Texas corporation (“Data Jack”).

Overview

WQN was
formed as a Texas corporation in June 2007, when it acquired an operating
business that was originally founded in 1996. WQN provides prepaid and postpaid
enhanced telecommunications services with an emphasis on transporting calls that
originate from the United States and Canada and terminate to specific regions of
the world. Customers utilize WQN’s Voice Over Internet Protocol (“VoIP”) network
to place quality international calls at discounted rates. The voice quality of
WQN’s VoIP calls is nearly the same as an international telephone call carried
over a traditional telephone line. A substantial portion of WQN’s revenue is
derived from the sale of prepaid service to customers calling from the United
States to India. WQN’s products and services are provisioned and sold online via
its websites.

Data Jack
was formed in February 2009, and its revenues prior to the Company’s acquisition
were $96,113. Data Jack specializes in delivering nationwide mobile
3G data coverage to for a competitive fixed monthly price, through a proprietary
USB device connected to any computer with a Windows or Mac operating
system.

14

Results
of Operations for the Year Ended December 31, 2009 Compared to the Same
Period in 2008

Revenues

Our
revenues for the years ended December 31, 2009 and 2008 were $2,462,060 and
$3,755,916, respectively. Revenues decreased primarily because the retail rates
to India, one of the Company’s primary markets, have been rapidly declining due
to increased competition. This trend is expected to continue, in turn
putting further downward pressure on revenues and margins. Revenues are derived
primarily from our prepaid international calling services and our consumer based
internet telephony services. Inflation has not had a material effect on revenues
during the past two fiscal years.

Cost
of Sales and Gross Profit

Cost of
sales was $1,638,895 and $2,412,209 for the years ended December 31, 2009
and 2008, respectively. This resulted in gross profit of $823,164 (33.4%) and
$1,343,707 (35.8%) for the respective 2009 and 2008 periods. The decreased gross
margin in 2009 was due to lowering our effective sales prices on our India
traffic due to competitive market pressures, while our vendor cost reductions
have not kept pace. Our aggregate gross profit decline during the year ended
December 31, 2009 versus the corresponding 2008 period was otherwise due
primarily to our decreased revenues during that period.

Operating
Expenses

Operating
expenses were $2,729,233 and $1,289,300 for the years ended December 31,
2009 and 2008, respectively. Compensation and consulting expenses increased from
$805,243 to $1,748,645 during these periods due primarily to the $810,000
noncash consulting agreement charge as described in Note I to the Company’s
consolidated financial statements and, to a lesser extent, the iTella, Inc.
consulting agreement entered into in 2009, as described in Note G to the
Company’s consolidated financial statements. General and administrative
(“G&A”) expenses increased from $425,622 in 2008 to $890,832 in 2009,
primarily due to increased legal and audit fees associated with the Share
Exchange Agreement and becoming a publicly reporting company, and generally
increased advertising, rent and travel expenses.

Net
Income (Loss)

The
revenue and gross margin decreases coupled with the operating expense increases
noted above, combined to result in a net loss of $1,931,897, compared to net
income of $28,025, in 2009 and 2008, respectively.

Liquidity
and Capital Resources

Cash and
cash equivalents were $94,003 at December 31, 2009. Our net cash used in
operating activities for the year ended December 31, 2009 was $752,551, due
primarily to our cash-based net loss during this period, partially offset by
increases in our accounts payable, advances from a former shareholder, and
unearned revenue. Cash was used primarily to purchase the Domain Names and
network equipment during this period. Our primary source of funding, as needed,
has been through advances from a former shareholder under an unsecured revolving
non-interest bearing promissory note payable with a maximum amount of
$1,000,000, and sales of common stock and a convertible note for cash. Advances
under this unsecured promissory note totaled $758,781 at December 31,
2009.

Our accompanying consolidated financial
statements have been prepared in conformity with accounting principles generally
accepted in the United States of America, which contemplates continuation of the
Company as a going concern. The Company has incurred operating losses and
negative cash flows from operations since its Share Exchange Agreement described
in Note A above, has incurred a retained earnings deficit of $1,930,012 through
December 31, 2009, and has been dependent on issuances of debt and equity
instruments to fund its operations. The Company intends to increase its
future profitability and seek new sources or methods of financing or revenue to
pursue its business strategy. However, there can be no certainly that
the Company will be successful in this strategy. These factors raise
substantial doubt about the Company’s ability to continue as a going
concern. Accordingly, the Company's independent auditors have added
an explanatory paragraph to their opinion on the Company's consolidated
financial statements for the year ended December 31, 2009, based on substantial
doubt about the Company's ability to continue as a going concern.

15

These consolidated financial statements
do not include any adjustments that might result from the outcome of these
uncertainties. In this regard, Management is proposing to raise any necessary
additional funds through loans and additional sales of its common stock. There
is no assurance that the Company will be successful in raising additional
capital.

On February 27, 2010, the Company
executed a $1,000,000 Senior Secured Promissory Note payable to Gilder Funding
Corp., a company that is a shareholder of the Company and is controlled by Mr.
Warren Gilbert (the “Secured Note”) for cash. The proceeds were used
to repay the $200,000 note payable to Mr. Gilbert referred to in Note H to the
consolidated financial statements, plus accrued interest. Interest on
the Secured Note is payable monthly at 15% per annum beginning April 5, 2010,
with the principal and any unpaid interest due on or before February 27, 2016.
The Secured Note is secured by substantially all of the Company’s
assets.

Capital
Expenditure Commitments

We did
not have any substantial outstanding commitments to purchase capital equipment
at December 31, 2009.

Plan
of Operations

By
adjusting our operations and development to the level of capitalization, we
believe that we have sufficient capital resources to meet projected cash flow
requirements. However, if during that period or thereafter, we are not
successful in generating sufficient liquidity from operations or in raising
sufficient capital resources, on terms acceptable to us, this could have a
material adverse effect on our business, results of operations, liquidity and
financial condition.

Our
future cash requirements include those associated with maintaining our status as
a reporting entity. We believe that on an annual basis those costs would not
exceed an average of $25,000 per month.

We
presently do not have any available credit, bank financing or other external
sources of liquidity. Due to our brief operating history and lack of substantial
historical operating profits, our operations have not been a source of
liquidity. We will need to obtain additional capital in order to fund our
operations and become profitable. In order to obtain capital, we may need to
sell additional shares of our common stock or borrow funds from private lenders.
There can be no assurance that we will be successful in obtaining additional
funding.

Critical
Accounting Policies

The
application of our accounting policies, which are important to our financial
position and results of operations, requires significant judgments and estimates
on the part of management. These estimates bear the risk of change due to the
inherent uncertainty attached to the estimate and are likely to differ to some
extent from actual results. A description of our critical accounting policies
follows:

1.

In
accordance with Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets," the Company tests its
intangible asset (goodwill) for impairment at least annually by comparing
the fair value of this asset to its carrying value. If in the future the
carrying value of our goodwill exceeds its fair value, the
Company will recognize an impairment charge in an amount equal to
that excess. For purposes of these tests, the excess of the fair value of
the Company over the amounts assigned to its identified assets and
liabilities is the implied fair value of its
goodwill.

2.

Our
revenues are primarily derived from fees charged to terminate voice
services over the Company's network and from related monthly recurring
charges. Variable revenue is earned based on the number of minutes during
a call and is recognized upon completion of a call. Revenue for each
customer is calculated from information received through the Company's
network switches. The Company tracks the information received from the
switch and analyzes the call detail records and applies the respective
revenue rate for each call. Fixed revenue is earned from monthly recurring
services provided to customers that are fixed and recurring in nature, and
are connected for a specified period of time. Revenues are recognized as
the services are provided and continue until the expiration of the
contract or until cancellation of the service by the customer. Cash fees
received prior to call completion are recorded on the Company’s balance
sheet as unearned revenue.

ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCUSSIONS ABOUT MARKET RISK

Not required.

16

ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA

The Company’s consolidated financial
statements are included following the signature page to this Form
10-K.

The audited financial statements of the
aquiree Mobile Internet Devices, LLC are incorporated by reference to the
Company’s Current Report on Form 8-K/A as filed on February 23,
2010.

ITEM 9. CHANGES AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM
9A(T). CONTROLS AND PROCEDURES

As required by Rule 13a-15(b)
under the Exchange Act as of December 31, 2009, our management conducted an
evaluation with the participation of our President who also serves as our
principal financial and accounting officer (the “Certifying Officer”) regarding
the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).
Our management, with the participation of the Certifying Officer, also conducted
an evaluation of our internal control over financial reporting as of
December 31, 2009.

A significant deficiency is a control
deficiency, or combination of control deficiencies, that adversely affects a
company’s ability to initiate, authorize, record, process or report external
financial data reliably in accordance with generally accepted accounting
principles, such that there is more than a remote likelihood that a misstatement
of our annual or interim financial statements that is more than inconsequential
will not be prevented or detected. A material weakness is a significant
deficiency, or combination of significant deficiencies, that results in more
than a remote likelihood that a material misstatement of a company’s annual or
interim financial statements will not be prevented or detected, as of
December 31, 2009. Our President, who is our sole executive officer,
is not a financial or accounting professional, and we do not have a chief
financial officer or sufficient accounting staff. Until we are able
to engage a qualified financial officer, and/or accounting staff, we may
continue to experience material weaknesses in our disclosure controls that may
continue to adversely affect our ability to timely file our quarterly and annual
reports.

Based on this evaluation and in
accordance with the requirements of Auditing Standard No. 2 of the Public
Company Accounting Oversight Board, our Certifying Officer concluded that our
disclosure controls and procedures were ineffective as of December 31,
2009.

Our management, including the
Certifying Officer, does not expect that our disclosure controls and procedures
will prevent all errors and all improper conduct. A control system, no matter
how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, a design
of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of improper
conduct, if any, have been detected. These inherent limitations include the
realities that judgments and decision-making can be faulty, and that breakdowns
can occur because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or more
persons, or by management override of the control. Further, the design of any
system of controls is also based in part upon assumptions about the likelihood
of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Over time,
controls may become inadequate because of changes in conditions, or the degree
of compliance with the policies or procedures may deteriorate. Because of the
inherent limitations and a cost-effective control system, misstatements due to
error or fraud may occur and may not be detected.

17

Our management is responsible for
establishing and maintaining adequate internal control over financial reporting,
as such term is defined in Rule 13a-15(f) under the Exchange Act. Our
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles, and includes those policies and
procedures that:

·

Pertain
to the maintenance of records that, in reasonable detail accurately and
fairly reflect the transactions and dispositions of our
assets;

·

Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being
made only in accordance with authorization of our management and
directors; and

·

Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have
a material effect on the financial
statements.

Our management, including the
Certifying Officer, assessed the effectiveness of our internal control over
financial reporting as of December 31, 2009. Based on this evaluation and
in accordance with the requirements of Auditing Standard No. 2 of the
Public Company Accounting Oversight Board, the Certifying Officer concluded that
we did not maintain effective internal control over financial reporting as of
December 31, 2009 based on the criteria in the Internal Control -
Integrated Framework. Until we are able to engage a qualified financial officer,
and/or accounting staff, we may continue to be unable to maintain effective
internal control over our financial reporting.

This annual report does not include an
attestation report of the Company’s registered public accounting firm regarding
internal control over financial reporting. Management’s report was not subject
to attestation by the Company’s registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit the
Company to provide only management’s report in this annual report.

There were no changes in our internal
control over financial reporting identified in connection with the evaluation of
such internal control that occurred during our last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

ITEM 9B. OTHER
INFORMATION

None.

18

PART
III

ITEM 10. DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Below are
the names and certain information regarding the Company’s executive officers and
directors:

Names:

Ages

Titles:

Board
of Directors (1)

Stuart
Ehrlich

36

President
and Chief Executive Officer

Director

Marcin
Pycko

31

Chief
Technology Officer

Gladys
Perez

36

Vice
President and Secretary

Director

Robert
Picow

54

Director,
Chairman

———————

(1)
Directors are elected to serve until the next annual meeting of stockholders and
until their successors are elected and qualified. Currently there are four seats
on our Board of Directors.

Currently,
our directors are not compensated for their services (see Robert Picow’s
compensation in Item 11. Executive Compensation for his services as an employee
beginning January 1, 2010), although their expenses in attending meetings are
reimbursed. Officers are elected by the Board of Directors and serve until their
successors are appointed by the Board of Directors. Diversity is not a formal
consideration in determining Board member nominations. The Board has chosen to
separate the Chairman and Chief Executive Officer positions in order to enhance
the independence of the Board and management. There was one Board meeting by
telephone on January 21, 2010, and several actions by written
consent.

Biographical
resumes of each officer and director are set forth below.

Stuart Ehrlich joined the
Company at the closing of the Exchange as its President, Chief Executive Officer
and as a director. Since August 2005, he has been the president of
CandoCorp., a private consulting firm focused on the telecommunications,
finance, technology and entertainment industries. From 2005 to 2006, he was a
director of BioBalance, a publicly traded biotechnology company. For five years
prior to August 2005, Mr. Ehrlich was executive vice president of
Datawind, a Canadian corporation that produced a hardware and software product
for the wireless telephone industry. He is a licensed attorney in Massachusetts.
Mr. Ehrlich brings relevant general management, public company and
telecommunications experience to his position as a Board member.

Marcin Pycko became Chief
Technical Officer upon the closing of the Exchange. From 2004 until the present,
he has been CEO of PhonicEQ, Inc., a manufacturer of telecommunications
hardware. Also from 2004 to 2007, he consulted with Voiceglo, a unit of The
Globe.com, Inc., developing peer-to-peer telecommunications via the Internet.
Prior to 2004, he worked at Digium, Inc and Nasza telecom, S.A., one of the
first free-enterprise telecom operators in Warsaw, Poland. Mr. Pycko also earned
a Telecommunications degree in 2002 from the Warsaw University of Technology.
Mr. Pycko brings relevant general management and technical telecommunications
experience to his position as a Board member.

Gladys Perez has served as a
consultant for WQN since June 2007, formulating strategies to diversify its
product portfolio and penetrate new ethnic markets.From March 1999
through May 2006, she served as a marketing consultant for the
Sun-Sentinel, Inc., and from 1989 through 1999 she held marketing and management
positions with Caribbean Overseas Trading, Inc. and Embassy Suites. Ms. Perez
brings relevant management and marketing experience to her position as a Board
member.

Robert Picow has served as a
Director of the Company since December 2009. Mr. Picow is the Vice Chairman of
Eezinet Corporation, which is a private telecommunications company holding PCS
licenses for cellular spectrum. He served as Chairman of Cenuco, Inc. (which
subsequently changed its name to Lander Co., Inc. and is now known as Ascendia
Brands, Inc.), a public communications technology company, from April 2004 until
its merger with Lander Co., Inc. Mr. Picow has served as a member of the board
of directors of Cenuco, Inc. (now Ascendia) since July 2003, and as chief
executive officer of the Cenuco Wireless division since 2005. From June 1996 to
August 1997, he served as the Vice Chairman of Brightpoint, Inc., a publicly
traded communications company, and was its President from June 1996 until
October 1997. In 1981, Mr. Picow founded Allied Communications, Inc., the
pioneer U.S. wireless electronics distributorship, serving 16 years as its
Chairman, Chief Executive Officer and President until the 1996 merger of Allied
and Brightpoint, Inc. Since May 2001, he has served as a Director of Fundamental
Management Corporation, a private fund management company whose partnerships
hold an investment in the Company. He also is a Director of Infosonics
Corporation, a multinational telecommunications company, and of American Telecom
Services, Inc., a provider of internet phone and prepaid long distance
communications services. Mr. Picow is currently a board member of the following
public companies: Eezinet Corporation, SMF, and Infosonics
Corporation. During the past five years, Mr. Picow also served on the
boards of the following public companies: Ascendia Brands, Inc., Cenuco, Inc.,
and American Telecom Services, Inc. Mr. Picow brings relevant general
management, public company and telecommunications experience to his position as
a Board member.

19

Section
16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act
requires our directors, executive officers and holders of more than 10% of our
common stock to file with the SEC reports of their ownership and changes in
ownership of our securities. Officers, directors and greater than 10%
shareholders are required by SEC regulations to furnish us with copies of all
Section 16(a) reports they file. To our knowledge, based solely on a
review of the copies of such reports and written representations that no other
reports were required, we believe that all filing requirements applicable to our
officers, directors and greater than 10% shareholders were satisfied during the
year ended December 31, 2009.

Board
Committees

The
Company does not maintain a separately-designated, standing audit committee,
compensation committee, or nominating committee, and the Board performs these
functions. Due to the Company’s relatively small size, the Board has determined
that it is not necessary to have a separately-designated, standing nominating
committee or procedures for submitting shareholder nominations. The Board has
not established separately-designated, standing audit committee or compensation
committee for similar reasons. Eventually, the Board will review the
advisability of establishing audit, compensation and nominating committees
composed primarily of independent directors to perform the functions normally
performed by such groups.

Code
of Ethics

Due to
its relatively small size, the Company has not yet adopted a comprehensive
written code of ethics that applies to the principal executive officer,
principal financial officer, principal accounting officer or controller, or
person performing similar functions. It is generally the Company’s policy that
its operations are to be conducted in compliance with applicable laws and
regulations and with high ethical standards. This policy applies to all
employees and others working on behalf of Quamtel wherever located.

20

ITEM 11. EXECUTIVE
COMPENSATION

The
following table sets forth the annual and long-term compensation paid to WQN’s
Chief Executive Officer and the other executive officers at the end of the last
completed fiscal year. We refer to all of these officers collectively as our
“named executive officers.”

Summary
Compensation Table

Name
& Principal Position

Year

Salary

($)

Bonus

($)

Stock

Awards

($)

Option

Awards

($)

Non-Equity

Incentive
Plan

Compensation

($)

Change
in

Pension
Value

and
Non-

Qualified

Deferred

Compensation

Earnings

($)

All
Other

Compensation

($)

Total

($)

Steven
Ivester,CEO and
President until
July 2009

2008

$

282,000

N/A

N/A

N/A

N/A

N/A

$

1,809

$

283,809

Steven
Ivester

2009

$

140,000

N/A

N/A

N/A

N/A

N/A

$

-

$

140,000

Stuart
Ehrlich, CEO and President since August 2009

2009

$

27,039

N/A

N/A

N/A

N/A

N/A

$

-

$

27,039

Marcin
Pycko, CTO since August 2009

2009

$

24,249

N/A

N/A

N/A

N/A

N/A

$

-

$

24,249

Gladys
Perez, VP and Secretary since August 2009

2009

$

20,358

N/A

N/A

N/A

N/A

N/A

$

-

$

20,358

Outstanding
Equity Awards at Fiscal Year-End Table.

None.

Employment
Agreements with Executive Officers

All of
the Company’s employees are employed at-will. The Company intends to enter into
an employment agreement with Stuart Ehrlich. Terms of such an agreement have not
yet been set.

Beginning
January 1, 2010, Robert Picow, a director of the Company, is also employed in a
non-officer position with the Company. His 2010 compensation to date has
consisted of 24,000 shares of the Company’s common stock, and cash payments
totaling $15,000.

Consulting
Agreements

Effective
August 1, 2009 and subsequently amended, the Company executed a Restated
Consulting Services Agreement with iTella, Inc., whereby iTella,
Inc. shall provide, at the reasonable request of the Company’s
management, advanced business strategy, financing, product development and
marketing advice including but not limited to day to day operations. The initial
term of this agreement is for five years, and automatically renews for
additional one year terms if approved by both parties. During this agreement’s
term and at the Company’s expense, iTella, Inc. will be provided an office and
administrative support in Weston, Florida. Consultant’s compensation shall
consist of the following:

1.

Cash
payments totaling $8,333 for the first two months, payable
monthly;

2.

Cash
payments totaling $66,667 for the next four months, payable
monthly;

3.

Annual
cash payments of $250,000 thereafter, payable
monthly;

4.

Nine percent
of the Company’s consolidated gross revenue, payable quarterly (except the
first two months, in which the rate is one percent of gross
revenues), subject to an annual calendar year cap of
$800,000;

5.

Employees
of Consultant may be eligible for grants of stock options
pursuant to the Company’s 2009 Equity
Incentive Plan, in such amounts as may from time to time be
determined by the Company, at its sole discretion;
and

6.

Reimbursement
of reasonable, related business
expenses.

21

Expenses
under the Restated Consulting Services Agreement for the year ended
December 31, 2009 were $109,761, of which $31,261 is unpaid and included in
accrued expenses at December 31, 2009. Prior to closing the Restated Consulting
Services Agreement, the Company did not have expertise in the management and
financing of a public company, and required the services of iTella, Inc. as
outlined in the Restated Consulting Services Agreement. The Restated Consulting
Services Agreement is not cancellable by either party in advance of its
contractual term, except under a defined change in control.

On
August 20, 2009, the Company also executed a one-year consulting agreement
with consultant Warren Gilbert, whereby Mr. Gilbert will provide advice and
counsel regarding the Company’s financial management and strategic
opportunities. As compensation, Mr. Gilbert was issued 300,000 shares of the
Company’s common stock, which was subsequently registered in a registration
statement on Form S-8 filed on November 9, 2009.

Director
Compensation

Our
directors are elected by the vote of a majority in interest of the holders of
our voting stock and hold office until the expiration of the term for which he
or she was elected and until a successor has been elected and
qualified.

A
majority of the authorized number of directors constitutes a quorum of the Board
of Directors for the transaction of business. The directors must be present at
the meeting to constitute a quorum. However, any action required or permitted to
be taken by the Board of Directors may be taken without a meeting if all members
of the Board of Directors individually or collectively consent in writing to the
action.

The
Company’s 2009 Equity Incentive Plan allows for the issuance of options to
purchase up to 5,000,000 shares of the Company’s common stock to selected
employees, outside directors and consultants of Quamtel, Inc., at the sole
discretion of, and with terms determined by, the Company’s board of directors.
No such options were issued through December 31, 2009.

Beneficial Ownership

The
following table sets forth information as of February 28, 2010, except as
otherwise noted, with respect to the beneficial ownership of our common stock
and is based on 18,811,175 shares of common stock issued and outstanding as of
February 28, 2010:

·

Each
person known by us to own beneficially more than five percent of our
outstanding common stock;

·

Each
of our directors and prospective directors;

·

Our
Chief Executive Officer and each person who serves as an executive officer
of the Company; and

·

All
our executive officers and directors as a
group.

The
number of shares beneficially owned by each shareholder is determined under
rules promulgated by the SEC. The information is not necessarily indicative of
beneficial ownership for any other purpose. Under these rules, beneficial
ownership includes any shares as to which the individual has sole or shared
voting power or investment power and any shares as to which the individual has
the right to acquire beneficial ownership within 60 days, except as otherwise
noted, through the exercise or conversion of any stock option, warrant,
preferred stock or other right. The inclusion in the following table of those
shares, however, does not constitute an admission that the named shareholder is
a direct or indirect beneficial owner of those shares. Unless otherwise
indicated, to our knowledge based upon information produced by the persons and
entities named in the table, each person or entity named in the table has sole
voting power and investment power, or shares voting and/or investment power with
his or her spouse, with respect to all shares of capital stock listed as owned
by that person or entity.

From time
to time, Steven Ivester, the Company’s former sole shareholder and currently a
consultant to the Company through a Consulting Services Agreement with iTella,
Inc., (more fully described in Note G to the Company’s consolidated financial
statements) has made personal advances to the Company. These advances
under a revolving unsecured promissory note with a maximum amount of $1,000,000,
are repayable upon demand, and are non-interest bearing. Such advances amounted
to $758,781 and $10,575 at December 31, 2009 and 2008,
respectively.

On December 15, 2009, the Company
issued an unsecured $200,000 promissory note payable (the “Note”) to Warren
Gilbert (the “Holder”) for cash. The Note bears interest at 18% per
year, and unpaid principal and interest is repayable in full on June 15, 2010.
The Holder will be paid $40 toward the Note for each Data Jack unit sold, plus a
$5.00 spiff (in addition to interest) on each Data Jack unit sold up to 5,000
units.

On
August 20, 2009, the Company issued and sold $300,000 in principal amount
of an unsecured convertible note to Warren Gilbert, receiving net proceeds of
$300,000. This note bore interest at 18% and was subsequently converted into
115,000 shares of the Company's common stock. Mr. Gilbert also received six-year
warrants to purchase 54,000 shares of the Company's common stock for $2.70 per
share.

On
August 20, 2009, the Company also executed a one-year consulting agreement
with Mr. Gilbert, who is also the president of Gilder Funding Corp., a
shareholder of the Company, whereby he will provide advice and counsel regarding
the Company’s financial management and strategic opportunities. As compensation,
Mr. Gilbert was issued 300,000 shares of the Company’s common stock, which were
registered in a registration statement on Form S-8 on November 9,
2009.

On
February 27, 2010, the Company executed a $1,000,000 Senior Secured Promissory
Note payable to Gilder Funding Corp, a company that is a shareholder of the
Company and is controlled by Mr. Warren Gilbert (the “Secured Note”) for
cash. The proceeds were used to repay the $200,000 note payable to
Mr. Gilbert referred to in Note H to the consolidated financial statements, plus
accrued interest. Interest on the Secured Note is payable monthly at
15% per annum beginning April 5, 2010, with the principal and any unpaid
interest due on or before February 27, 2016. The Secured Note is secured by
substantially all of the Company’s assets.

23

Director
Independence

Our
directors are not “independent” directors within the meaning of Marketplace
Rule 4200 of the National Association of Securities Dealers,
Inc.

ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees. Jewett, Schwartz,
Wolfe & Associates provided services to us during the years ended
December 31, 2009 and 2008 in the categories shown below.

Years
Ending

December
31,

2009

2008

Audit
Fees
(1)

$

43,000

$

17,500

Audit-Related
Fees (2)

-

-

Tax
Fees (3)

-

-

All
Other Fees (4)

-

-

———————

(1)

Audit fees - These are
fees billed for professional services performed by Jewett, Schwartz, Wolfe
& Associates for the audit of our annual financial statements and
review of financial statements included in our Form 10-Q filings, and
services that are normally provided in connection with statutory
regulatory filings or engagements.

(2)

Audit-related fees -
These are fees billed for assurance and related services performed by
Jewett, Schwartz, Wolfe & Associates that are reasonably related to
the performance of the audit or review of our financial statements. These
include attestations that are not required by statute, and consulting on
financial accounting/reporting standards.

(3)

Tax fees - These are
fees billed for professional services performed by Jewett, Schwartz, Wolfe
& Associates with respect to tax compliance, tax advice and tax
planning. These include preparation of original and amended tax returns
for the Company and its consolidated subsidiaries, refund claims, payment
planning, tax audit assistance, and tax work stemming from “audit-related”
items.

(4)

All other fees -
Services that do not meet the above three category descriptions are not
permissible work performed for us by Jewett, Schwartz, Wolfe &
Associates.

All services to be performed for the
Company by independent public accountants, including those fees outlined above
for 2009 and 2008, must be pre-approved by the Board, which has chosen not to
adopt any pre-approval policies for enumerated services and situations, but
instead has retained the sole authority for such approvals.

24

PART
IV

ITEM 15. EXHIBITS
AND FINANCIAL STATEMENTS AND SCHEDULES

The
following documents are filed as a part of this report or are incorporated by
reference to previous filings, if so indicated:

Certificate
of the Chief Executive Officer, principal financial and accounting officer
pursuant to Rule 13a-14(a) of the Exchange Act. *

32.1

Certificate
of the Chief Executive Officer, principal financial and accounting officer
pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*

Proforma
unaudited condensed consolidated statement of operations for the year
ended December 31, 2009. *

*filed
herewith

(1

)

Incorporated
by reference to the registration statement on Form 10-SB as filed on
October 12, 2000.

(2

)

Incorporated
by reference to the Current Report on Form 8-K as filed on January 11,
2008.

(3

)

Incorporated
by reference to the Current Report on Form 8-K as filed on August 3,
2009.

(4

)

Incorporated
by reference to the Registration Statement on Form S-8 (file No.
333-162987) as filed on November 9, 2009.

(5

)

Incorporated
by reference to the Quarterly Report on Form 10-Q as filed on November 16,
2009.

(6

)

Incorporated
by reference to the Current Report on Form 8-K as filed on December 14,
2009.

(7

)

Incorporated
by reference to the Definitive Proxy Statement as filed on August 17,
2009.

(8

)

Incorporated
by reference to the Current Report on Form 8-K as filed on January 27,
2010.

(9

)

Incorporated
by reference to the Current Report on Form 8-K/A as filed on February 23,
2010.

25

SIGNATURES

In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Date:
March 31, 2010

QUAMTEL,
INC.

By:

/s/
Stuart Ehrlich

Stuart
Ehrlich

Chief
Executive Officer, President,

principal
executive officer and

principal
financial and accounting officer

26

CONSOLIDATED
FINANCIAL STATEMENTS

Quamtel,
Inc.

Table of
Contents

Report
of Registered Public Accounting
Firm

F –
2

Consolidated
Balance
Sheet

F –
3

Consolidated
Statements of
Operations

F –
4

Consolidated
Statements of Changes in Stockholders'
Equity

F –
5

Consolidated
Statements of Cash
Flows

F –
6

Notes
to Consolidated Financial
Statements

F –
7 -15

F-1

REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Shareholders of

Quamtel,
Inc.

We
have audited the accompanying consolidated balance sheets of Quamtel, Inc. as of
December 31, 2009 and 2008 and the related consolidated statements of
operations, changes in shareholders’ equity and cash flows for the years ended
December 31, 2009 and 2008. These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.

We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provided a reasonable basis for our
opinion.

In
our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Quamtel, Inc. as of
December 31, 2009 and 2008, and the consolidated results of its operations and
its cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States.

These
consolidated financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note D to the consolidated
financial statements, the Company has operating and liquidity concerns, has
incurred net losses approximating $1,900,000 as of December 31, 2009. These
factors raise substantial doubt about the ability of the Company to continue as
a going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties. In this
regard, Management is proposing to raise any necessary additional funds through
loans and additional sales of its common stock. There is no assurance that the
Company will be successful in raising additional capital.

MEMBER –
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS ● FLORIDA INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTANTS

PRIVATE
COMPANIES PRACTICE SECTION OF THE AICPA ● REGISTERED WITH THE PUBLIC COMPANY
ACCOUNTING OVERSIGHT BOARD OF THESEC

F-2

Quamtel,
Inc.

Consolidated
Balance Sheets

Years
Ended December 31, 2009 and 2008

2009

2008

ASSETS

Current
assets:

Cash
and cash equivalents

$

94,003

$

11,562

Accounts
receivable, net

30,367

38,072

Income
tax receivable

11,678

-

Inventory

61,750

-

Prepaid
expenses and deposits

449,705

156,825

Total
current assets

647,503

206,459

Property
and equipment, net

404,472

229,565

Intangible
assets

2,653,109

367,589

TOTAL
ASSETS

$

3,705,084

$

803,613

LIABILITIES
AND SHAREHOLDERS' EQUITY

Current
liabilities:

Accounts
payable

$

383,234

$

20,380

Accrued
expenses

113,901

29,804

Unearned
revenue

445,347

280,636

Advances
from related party

758,781

10,575

Stock-based
payable

26,000

-

Current
portion of notes payable

250,336

25,518

Income
tax payable

-

971

Total
current liabilities

1,977,599

367,884

Noncurrent
portion of notes payable

14,496

33,844

TOTAL
LIABILITIES

1,992,095

401,728

Shareholders'
equity:

Common
stock - $0.001 par value; 200,000,000 shares authorized;

18,662,175
and 16,472,175 shares issued and outstanding at

December
30, 2009 and December 31, 2008, respectivley

$

18,662

$

16,472

Preferred
stock - $0.001 par value; 50,000,000 shares authorized;

no
shares issued and outstanding

-

-

Additional
paid-in capital

3,624,338

383,528

Retained
earnings (deficit)

(1,930,012

)

1,885

Total
shareholders' equity

1,712,988

401,885

TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY

$

3,705,083

$

803,613

The
accompanying notes are an integral part of these consolidated financial
statements.

F-3

Quamtel,
Inc.

Consolidated
Income Statement

Years
ended December 31, 2009 and 2008

2009

2008

Revenues

$

2,462,060

$

3,755,916

Cost
of sales

1,638,895

2,412,209

Gross
profit

823,165

1,343,707

Operating
expenses:

Compensation,
consulting and related expenses

1,748,645

805,243

General
and administrative expenses

890,832

425,622

Depreciation
and amortization

89,756

58,435

Total
operating expenses

2,729,233

1,289,300

Income
(loss) from operations before income taxes

(1,906,069

)

54,407

Other
expense:

Interest
and financing expense

26,799

11,945

Total
other expense

26,799

11,945

Income
(loss) before income taxes

(1,932,868

)

42,462

Income
tax expense (benefit)

(971

)

14,437

Net
income (loss)

$

(1,931,897

)

$

28,025

Basic
and diluted income (loss) per share:

Income
(loss) from operations before income taxes

$

(0.12

)

$

0.04

Income
tax expense (benefit)

(0.00

)

0.01

Net
income (loss) per share

$

(0.12

)

$

0.03

Weighted
average number of shares outstanding

16,676,668

1,000,000

The
accompanying notes are an integral part of these consolidated financial
statements.

F-4

Quamtel,
Inc.

Consolidated
Statements of Changes in Shareholders' Equity

Years
Ended Decemember 31, 2009 and 2008

Retained

Common
Stock

Additional
Paid-

Earnings

Shares

Amount

in
Capital

(Deficit)

Total

Balance
as of December 31, 2007, after giving retroactive

16,472,175

$

16,472

$

383,528

$

(26,140

)

$

373,860

effect
to the merger dated July 28, 2009

Net
income for the year

-

-

28,025

28,025

Balance
as of December 31, 2008

16,472,175

16,472

383,528

1,885

401,885

Common
stock issued for debt conversion

115,000

115

310,385

-

310,500

Common
stock issued for services

300,000

300

809,700

-

810,000

Common
stock issued for Data Jack, Inc. acquisition

1,500,000

1,500

1,873,500

-

1,875,000

Common
stock issued for cash

250,000

250

179,750

-

180,000

Common
stock issued for 800.com acquisition

25,000

25

67,475

-

67,500

Net
loss for the year

-

-

(1,931,897

)

(1,931,897

)

Balance
as of December 31, 2009

18,662,175

$

18,662

$

3,624,338

$

(1,930,012

)

$

1,712,988

The
accompanying notes are an integral part of these financial
statements.

F-5

Quamtel,
Inc.

Consolidated
Statements of Cash Flows

For
the Years Ended December 30, 2009 and 2008

2009

2008

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

$

(1,931,897

)

28,025

Adjustments to reconcile net income (loss) to net cash

used in operating activities:

Depreciation and amortization

89,757

58,435

Noncash consulting expense

810,000

-

Noncash interest and financing expenses

10,500

-

Changes in operating assets and liabilities net of
assets

and liabilities acquired:

Accounts receivable

7,706

24,738

Inventory

(61,750

)

-

Prepaid expenses and deposits

(275,880

)

(13,359

)

Income tax payable

(12,649

)

14,437

Accounts payable

362,854

(96,129

)

Accrued expenses

84,097

(10,478

)

Unearned revenue

164,711

(27,481

)

Net cash used in operating activities

(752,551

)

(21,812

)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property & equipment

(256,726

)

(13,966

)

Acquisition of tangible assets, net of liabilities assumed

(44,957

)

-

Acquisition of intangible assets

(280,000

)

-

Net cash used in investing activities

(581,683

)

(13,966

)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from common stock issuances

180,000

-

Proceeds from convertible debt issuances

300,000

-

Proceeds from promissory note issuances

250,000

-

Advances from (repayments to) related party

748,206

(189,500

)

Repayment of notes payable

(61,529

)

(6,315

)

Net cash provided by (used in) financing activities

1,416,677

(195,815

)

Net increase (decrease) in cash

82,441

(231,593

)

Cash and cash equivalents at beginning of period

11,562

243,155

Cash and cash equivalents at end of period

$

94,003

$

11,562

Supplemental cash flow information:

Cash paid for taxes

$

5,378

$

-

Cash paid for interest

$

26,799

$

11,945

Noncash investing and financing activities:

Issuance of notes payable for property and equipment

$

-

$

42,462

Issuance of common stock for intangible assets

$

1,968,500

$

-

Conversion of note payable to common stock

$

310,500

$

-

The
accompanying notes are an integral part of these consolidated financial
statements.

F-6

QUAMTEL,
INC.

NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE
A - ORGANIZATION AND DESCRIPTION OF BUSINESS

Quamtel, Inc., formerly known as Atomic
Guppy, Inc., XTX Energy, Inc. and Glen Manor Resources Inc., (the “Company”) was
incorporated on November 16, 1999 under the laws of the State of
Nevada. Prior to the closing of the share exchange agreement
described below, the Company was a “shell” corporation as that term is defined
in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act, as well as
SEC Release Number 33-8407.

On
January 13, 2009, the Company executed a Share Exchange Agreement (the
“Share Exchange Agreement”), pursuant to which the shareholders of WQN, Inc.
were entitled to receive a total of 15,000,000 post-split shares of the
Company’s common stock. All conditions for closing were satisfied or waived, and
the transaction closed on July 28, 2009.As a result of the
Exchange, the shareholders of WQN, Inc. owned approximately 91% of the
outstanding Common Stock of Quamtel. In conjunction with closing the Share
Exchange Agreement, certain outstanding obligations of Quamtel including
officers and director’s compensation, notes and amounts payable to officers and
directors and third party loans outstanding, were exchanged for 1,275,000
post-split shares of Quamtel’s common stock.

As a
result of the Share Exchange Agreement, WQN, Inc. became a wholly-owned
subsidiary of Quamtel, through which its operations are now conducted. On
September 8, 2009, Quamtel filed an amendment to its Articles of
Incorporation concluding a one-for-ten reverse split of its common stock, and
increasing its authorized stock to 200,000,000 common shares and 50,000,000
preferred shares.

The Share
Exchange Agreement has been accounted for as a reverse merger, and as such the
historical financial statements of WQN, Inc. are being presented herein as those
of the Company. Also, the capital structure of the Company for all periods
presented herein is different from that appearing in the historical financial
statements of the Company due to the recapitalization accounting.

On
December 9, 2009, the Company acquired all of the
outstanding membership interests of Mobile Internet Devices, LLC, a
Florida limited liability (“Mobile Devices”), for a combination of common stock,
stock warrants, and a royalty based on future earnings and new subscribers of
the acquired company. Mobile Devices was subsequently renamed and
reorganized as Data Jack, Inc., a Texas corporation (“Data Jack”).

NOTE B
– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles
of Consolidation

The
accompanying consolidated financial statements include the accounts of Quamtel,
Inc. and its wholly owned subsidiary Data Jack, Inc. All significant
intercompany transactions and balances have been eliminated. The
Company makes operating decisions, assesses performance and manages the business
as one reportable segment.

Use
of Estimates

The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities; disclosure of contingent
assets and liabilities at the date of the financial statements; and the reported
amounts of revenues and expenses. Actual results could differ from those
estimates.

Cash
and Cash Equivalents

For
purposes of reporting cash flows, the Company considers all cash on hand, in
banks, including amounts in book overdraft positions, certificates of deposit
and other highly liquid debt instruments with a maturity of three months or less
at the date of purchase, to be cash and cash equivalents. Cash overdraft
positions may occur from time to time due to the timing of making bank deposits
and releasing checks, in accordance with the Company's cash management
policies.

F-7

QUAMTEL,
INC.

NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Accounts
Receivable

Accounts
receivable are stated at the amount management expects to collect from
outstanding balances. Management provides for probable uncollectible amounts
based on its assessment of the current status of the individual receivables and
after using reasonable collection efforts. The allowance for doubtful accounts
as of December 31, 2009 and 2008 was zero.

Prepaid
Expenses and Deposits

A $300,000 cash payment was made in
December 2009 for a planned inventory purchase. The inventory was
received in January 2010 but was not as ordered. Therefore it was
returned for a cash refund. The $300,000 paid was included in prepaid
expenses and deposits in the consolidated balance sheet at December 31,
2009.

Income
Taxes

The
Company accounts for income taxes under the liability
method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
the results of operations in the period that includes the enactment date. If it
is more likely than not that some portion of a deferred tax asset will not be
realized, a valuation allowance is recognized.

Earnings
(Loss) Per Share

Basic
earnings (loss) per share is computed by dividing the net income (loss) for the
year by the weighted-average number of shares of common stock outstanding. The
calculation of fully diluted earnings per share assumes the dilutive effect of
all potential outstanding common shares attributable to outstanding options,
warrants, and convertible notes.

Fair
Value of Financial Instruments

The
carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.

Revenue
Recognition

The
Company follows the guidance in Staff Accounting Bulletin (SAB) No. 104, which
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements. SAB 104 states that revenue is realized or
realizable and earned when all of the following criteria are
met: persuasive evidence of
an arrangement exists, services have
been rendered, the seller's price to
the buyer
is fixed or determinable, and
collectibility is reasonably assured.

Revenues
are primarily derived from fees charged to terminate voice services over the
Company's network and from related monthly recurring charges. Variable revenue
is earned based on the number of minutes during a call and is recognized upon
completion of a call. Revenue from each customer is calculated from information
received through the Company's network switches. The Company tracks the
information received from the switch and analyzes the call detail records and
applies the respective revenue rate for each call. Fixed revenue is earned from
monthly recurring services provided to customers that are fixed and recurring in
nature, and are connected for a specified period of time. Revenues are
recognized as the services are provided and continue until the expiration of the
contract or until cancellation of the service by the customer. Cash fees
received prior to call completion are recorded on the Company’s consolidated
balance sheet as unearned revenue. As of December 31, 2009 and 2008, the Company
recorded unearned revenue of $445,347 and $280,636, respectively.

Property
and Equipment

Property
and equipment are stated at cost. Depreciation is provided over the estimated
useful lives of the related assets using the straight line method. The useful
lives of assets range from three to five years. The Company reviews the
recoverability of its property and equipment when events or changes in
circumstances occur that indicate that the carrying value of the asset group may
not be recoverable.

F-8

QUAMTEL,
INC.

NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Goodwill

In
accordance with Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets," the Company does not amortize
its intangible asset (goodwill), but instead tests its goodwill for impairment
at least annually by comparing the fair value of this asset to its carrying
value. If in the future the carrying value of goodwill exceeds its fair value,
the Company will recognize an impairment charge in an amount equal to that
excess. For purposes of these tests, the excess of the fair value of the Company
over the amounts assigned to its identified assets and liabilities is the
implied fair value of its goodwill.

Stock-Based
Compensation

Compensation
costs related to share-based payment transactions are recognized in the
statement of operations. With limited exceptions, the amount of compensation
cost will be measured based on the grant-date fair value of the equity or
liability instruments issued. In addition, liability awards will be remeasured
each reporting period. Compensation cost will be recognized over the
period that an employee provides service in exchange for the award.

Accounting
Standards Updates

In
June 2009, the Financial Accounting Standards Board (FASB) issued its final
Statement of Financial Accounting Standards (SFAS) No. 168, “The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles a Replacement of FASB StatementNo. 162”.
SFAS No. 168 made the FASB Accounting Standards Codification (the
Codification) the single source of U.S. GAAP used by nongovernmental
entities in the preparation of financial statements, except for rules and
interpretive releases of the Securities and Exchange Commission (SEC) under
authority of federal securities laws, which are sources of authoritative
accounting guidance for SEC registrants. The Codification is meant to simplify
user access to all authoritative accounting guidance by reorganizing
U.S. GAAP pronouncements into roughly 90 accounting topics within a
consistent structure; its purpose is not to create new accounting and reporting
guidance. The Codification supersedes all existing non-SEC accounting and
reporting standards and was effective for the Company beginning July 1,
2009. Following SFAS No. 168, the Board will not issue new standards
in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force
Abstracts; instead, it will issue Accounting Standards Updates (ASU). The FASB
will not consider ASUs as authoritative in their own right; these updates will
serve only to update the Codification, provide background information about the
guidance, and provide the bases for conclusions on the change(s) in the
Codification.

In
August 2009, the FASB issued ASU 2009-05 which includes amendments to
Subtopic 820-10, “Fair Value Measurements and Disclosures—Overall”. The update
provides clarification that in circumstances, in which a quoted price in an
active market for the identical liability is not available, a reporting entity
is required to measure fair value using one or more of the techniques provided
for in this update. The adoption of this standard did not have a material impact
on the Company’s consolidated financial position and results of
operations.

In
October 2009, the FASB has published ASU 2009-13, “Revenue Recognition
(Topic 605)-Multiple Deliverable Revenue Arrangements”, which addresses the
accounting for multiple-deliverable arrangements to enable vendors to account
for products or services (deliverables) separately rather than as a combined
unit. The guidance in this update is effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or
after June 15, 2010. Early adoption is permitted. The adoption of this
standard is not expected to have any impact on the Company’s consolidated
financial position and results of operations.

F-9

QUAMTEL,
INC.

NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In
January 2010, the FASB has published ASU 2010-06 “Fair Value Measurements and
Disclosures (Topic 820): - Improving Disclosures about Fair Value Measurements.
ASU No. 2010-06 clarifies and improves disclosure requirements related to
fair value measurements and disclosures. The new disclosures and clarifications
are effective for interim and annual reporting periods beginning after December
15, 2009, except for the disclosure about purchases, sales, issuances, and
settlement in the roll forward of activity in Level 3 fair value
measurements. Those disclosures are effective for fiscal years
beginning after December 15, 2010, and for interim periods within those fiscal
years. The amendments in this Update are effective for interim and annual
periods ending on or after December 15, 2009, and should be applied on a
retrospective basis. The adoption of this standard is not expected to have a
material impact on the Company’s consolidated financial position and results of
operations.

Other
ASUs not effective until after December 31, 2009 are not expected to have a
significant effect on the Company’s consolidated financial position or results
of operations.

NOTE
C - ACQUISITION

On
December 9, 2009, the Company acquired all of the
outstanding membership interests of Mobile Internet Devices, LLC, a
Florida limited liability (“Mobile Devices”), for a combination of common stock,
stock warrants, and a royalty based on future earnings and new subscribers of
the acquired company. Mobile Devices was subsequently renamed and
reorganized as Data Jack, Inc., a Texas corporation (“Data Jack”). The purchase
price consisted of the following:

(1)

1,500,000
shares of Quamtel’s restricted common
stock;

(2)

additional
shares of Quamtel’s common stock on June 30, 2011, such that the
original grant of 1,500,000 shares plus the additional shares shall have a
market value of at least $1,500,000, as determined by the average closing
prices of the Quamtel’s common stock during the month of
June 2011;

(3)

at
such time as the number of active subscribers for the services of the
Company being conveyed to Quamtel shall reach 100,000 subscribers, Quamtel
shall issue additional shares of its common stock to Sellers such that the
total shares issued to Sellers under (1) above and this section shall be
equal to 20% of the issued and outstanding common stock of the
Purchaser;

(4)

five-year
cashless stock purchase warrants to purchase 1,000,000 shares of Quamtel’s
restricted common stock, at an exercise price of
$2.68;

(5)

12%
of the net profit of Data Jack for as long as the subsidiary is owned by
Quamtel, which amount shall include the business being acquired and all
future enhanced products and services developed in the company platform,
including but not limited to other SIM enhanced products;
and

(6)

$15.00
of each activation fee for each new Data Jack customer plus 50% of the
activation fee in excess of $62.50 per customer, which amounts are
refundable by Sellers if the customer terminates service prior to the time
required by Data Jack’s network
provider.

The condensed Data Jack balance sheet,
reflecting the net fair value amounts assigned to each major asset and
liability, as of its acquisition date is as follows:

Cash

$

11,438

Accounts
receivable

76

Accounts
payable

(56,471

)

Net
liabilities assumed

(44,958

)

Goodwill

1,919,957

Net
fair value of assets acquired

$

1,874,999

F-10

QUAMTEL,
INC.

NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The goodwill recorded for the
acquisition of Data Jack represents the fair market value of liabilities as of
the acquisition date, plus $1,875,000, which represents the value of the
Company's common stock issued pursuant to the acquisition. The
warrants issued had nominal value at the acquisition date.

NOTE
D - GOING CONCERN

The accompanying consolidated financial
statements have been prepared in conformity with accounting principles generally
accepted in the United States of America, which contemplates continuation of the
Company as a going concern. The Company has incurred operating losses and
negative cash flows from operations since its Share Exchange Agreement described
in Note A above, has incurred a retained earnings deficit of $1,930,012 through
December 31, 2009, and has been dependent on issuances of debt and equity
instruments to fund its operations. The Company intends to increase its
future profitability and seek new sources or methods of financing or revenue to
pursue its business strategy. By adjusting our operations and
development to the level of capitalization, we believe that we have sufficient
capital resources to meet projected cash flow requirements. However, if during
that period or thereafter, we are not successful in generating sufficient
liquidity from operations or in raising sufficient capital resources, on terms
acceptable to us, this could have a material adverse effect on our business,
results of operations, liquidity and financial condition. These factors raise
substantial doubt about the Company’s ability to continue as a going concern.

Accordingly, the Company's independent
auditors have added an explanatory paragraph to their opinion on the Company's
consolidated financial statements for the year ended December 31, 2009, based on
substantial doubt about the Company's ability to continue as a going concern.
These consolidated financial statements do not include any adjustments that
might result from the outcome of these uncertainties.

NOTE
E - PROPERTY AND EQUIPMENT, NET

At
December 31, 2009 and 2008, respectively, property and equipment consisted
of the following:

2009

2008

Computers
and equipment

$

512,341

$

272,192

Automobile

32,123

32,123

Furniture
& Fixtures

19,077

2,500

Total

563,541

306,815

Less
accumulated depreciation

(159,069

)

(77,250

)

Total

$

404,472

$

229,565

Depreciation
expense for the years ended December 31, 2009 and 2008 amounted to $81,818
and $58,435, respectively.

F-11

QUAMTEL,
INC.

NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE
F - INTANGIBLE ASSETS

At
December 31, 2009 and 2008, respectively, intangible assets consisted of
the following:

2009

2008

Goodwill
associated with the acquisition of WQN, Inc.

$

367,589

$

367,589

Goodwill
associated with the acquisition of Data Jack, Inc.

1,919,957

-

Acquisition
of 800.com domain name

317,500

-

Acquisition
of DataJack.com domain name

56,000

-

Total

2,661,046

367,589

Less
accumulated amortization

(7,938

)

-

Total

$

2,653,108

$

367,589

Amortization expense for the years ended December 31, 2009 and 2008
amounted to $7,938 and $0, respectively. Amortization expense for the next five
years related to the domain names is projected to be $37,350 per year.

The
goodwill amounts of $367,589 and $1,919,957 were recorded primarily in
connection with the WQN, Inc. acquisition in June, 2007, and the Data Jack
acquisition in December, 2009, respectively.

In
August 2009, the Company issued 25,000 of its common shares, valued at
$67,500, to acquire an option to purchase the URL 800.com (the “800 Domain
Name”). Steven Ivester, an agent of iTella, Inc., (“Assignor”), subsequently
acquired the 800 Domain Name in a Bankruptcy Court auction for the sum of
$250,000. The acquisition was made for the benefit of the Company. Effective
September 30, 2009, in return for the Company reimbursing to Assignor his
$250,000 cost, Assignor assigned to the Company all right, title and interest in
and to the 800 Domain Name. The total cost of the 800 Domain Name was $317,500
which is less than its estimated fair value, and is being amortized over a
period of 10 years.

In December 2009, the Company
purchased the URL DataJack.com (the "DataJack Domain Name”) for a cash payment
of $30,000, plus a commitment to issue 10,000 of the Company’s common shares
which were valued at $26,000. The shares have not yet been issued,
and the liability is reflected as a stock-based payable on the Company’s
consolidated balance sheet at December 31, 2009. The total cost of
the DataJack Domain Name was $56,000 which is less than its estimated fair
value, and is being amortized over a period of 10 years.

NOTE
G – RELATED PARTY TRANSACTIONS

From time
to time, Steven Ivester, the Company’s former sole shareholder and currently a
consultant to the Company through a Consulting Services Agreement with iTella,
Inc., has made personal advances to the Company. These advances under a
revolving promissory note are repayable upon demand, are unsecured, and are
non-interest bearing. Such advances amounted to $785,781 and $10,575 at
December 31, 2009 and 2008, respectively. See Note F for the 800 Domain
Name transaction involving Mr. Ivester.

F-12

QUAMTEL,
INC.

NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Effective
August 1, 2009 and subsequently amended, the Company executed a Restated
Consulting Services Agreement with iTella, Inc., whereby iTella, Inc. provides,
at the reasonable request of the Company’s management, advanced business
strategy, financing, product development and marketing advice including but not
limited to day to day operations. The initial term of this agreement is for five
years, and automatically renews for additional one year terms if approved by
both parties. During this agreement’s term and at the Company’s expense, iTella,
Inc. will be provided an office and administrative support in Weston,
Florida. iTella, Inc.’s compensation shall consist of the
following:

1.

Cash
payments totaling $8,333 for the first two months, payable
monthly;

2.

Cash
payments totaling $66,667 for the next four months, payable
monthly;

3.

Annual
cash payments of $250,000 thereafter, payable
monthly;

4.

Nine percent
of the Company’s consolidated gross revenue, payable quarterly (except the
first two months, in which the rate is one percent of gross
revenues), subject to an annual calendar year cap of
$800,000;

5.

Employees
of Consultant may be eligible for grants of stock options
pursuant to the Company’s Equity Incentive Plan, in
such amounts as may from time to time be determined by the Company, at its
sole discretion; and

6.

Reimbursement
of reasonable, related business
expenses.

Expenses
under the Restated Consulting Services Agreement for the year ended
December 31, 2009 were $109,761, of which $31,261 is unpaid and included in
accrued expenses at December 31, 2009. Prior to closing the Restated Consulting
Services Agreement, Quamtel did not have expertise in the management and
financing of a public company, and required the services of iTella, Inc. as
outlined in the Restated Consulting Services Agreement. The Restated Consulting
Services Agreement is not cancellable by either party in advance of its
contractual term, except under a defined change in control.

On August
20, 2009, the Company also executed a one-year consulting agreement with Mr.
Warren Gilbert, who is the president of Gilder Funding Corp., a shareholder of
the Company, whereby Mr. Gilbert will provide advice and counsel regarding the
Company’s financial management and strategic opportunities. As compensation, Mr.
Gilbert was issued 300,000 shares of the Company’s common stock, which were
registered on a registration statement on Form S-8 on November 9,
2009.

NOTE
H - NOTES PAYABLE

At
December 31, 2009 and 2008, notes payable consisted of the
following:

2009

2008

Promissory
note payable - shareholder

$

200,000

$

-

Notes
payable - CIT Bank

35,899

32,505

Note
payable - American Honda Finance Corporation

20,256

26,857

Note
payable - Total Bank

8,678

-

Total
notes payable

264,833

59,362

Less
current portion

(250,336

)

(25,518

)

Noncurrent
portion

$

14,497

$

33,844

On December 15, 2009, the Company
issued an unsecured $200,000 promissory note payable (the Note”) to a
shareholder (the “Holder”) for cash. This note bears interest at 18%
per year, and unpaid principal and interest is repayable in full on June 15,
2010. The Holder will be paid $40 toward the Note for each Data Jack unit sold,
plus a $5.00 spiff (in addition to interest) on each Data Jack unit sold up to
5,000 units.

F-13

QUAMTEL,
INC.

NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The CIT bank notes are associated with
computer purchases in 2007, are repayable in 36 equal monthly payments through
August and September 2010, are unsecured, and bear interest at 24.49%
per year.

The American Honda Finance Corporation
note is related to an automobile purchase in 2008, is repayable in 60 equal
monthly payments through June 2013, is secured by the automobile, and bears
interest at 9.45% per year.

The Total Bank note is associated with
an insurance policy, is repayable in equal monthly payments of
$1,283 through July 2010, is unsecured, and bears interest at
10.34% per year.

The noncurrent portion of notes payable
at December 31, 2009 is substantially payable by the end of 2011.

See Note G for a discussion of advances
to the Company from Steven Ivester, the Company’s former sole shareholder and
currently a consultant to the Company through a Consulting Services Agreement
with iTella, Inc., under an unsecured revolving promissory note.

See also Note M for a secured
promissory note executed on February 27, 2010.

NOTE
I – FINANCING AND OTHER TRANSACTIONS

On
August 20, 2009, the Company issued and sold $300,000 in principal amount
of an unsecured convertible note to an accredited investor, Mr. Warren Gilbert
(the “Consultant”), receiving net proceeds of $300,000. This note bore interest
at 18% and was immediately convertible at the option of the Company into shares
of the Company's common stock at $2.70 per share. The Consultant also received
six-year warrants to purchase 54,000 shares of the Company's common stock for
$2.70 per share. On September 10, 2009, this convertible note, plus accrued
interest, was converted to 115,000 shares of the Company’s common
stock.

On
August 20, 2009, the Company also executed a one-year consulting agreement
with the Consultant, whereby the Consultant will provide advice and counsel
regarding the Company’s financial management and strategic opportunities. As
compensation, the Consultant was issued 300,000 shares of the Company’s common
stock, which were registered on a registration statement on Form S-8 on November
9, 2009. The 300,000 common shares were valued at $810,000 based on the traded
market per-share market price per share of $2.70 at August 20, 2009, and
has been reflected as additional paid-in capital on the company’s consolidated
balance sheet, and a noncash charge included in Compensation, consulting and
related expenses in the Company’s consolidated statement of
operations.

On
September 30, 2009, 150,000 shares of the Company’s common stock were
issued for $60,000 cash. On December 29, 2009, 100,000 shares of the
Company’s common stock were issued for $100,000 cash. Prior to the
Exchange, $20,000 was invested in pre-merger shareholders’ equity.

NOTE
J – EQUITY INCENTIVE PLAN

The
Company’s 2009 Equity Incentive Plan (the “Plan”) allows for the
issuance of options to purchase up to 5,000,000 shares of the Company’s common
stock to selected employees, outside directors and consultants of Quamtel, Inc.,
at the sole discretion of, and with terms determined by, the Company’s board of
directors. No such options have been issued through December 31,
2009.

F-14

QUAMTEL,
INC.

NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE
K - INCOME TAXES

The
components of the Company's income tax expense (benefit) are as
follows:

Years
ended

December
31, 2009

December
31, 2008

Current
benefit

$

(971

)

$

14,437

Deferred
benefit

-

-

Net
income tax benefit

$

(971

)

$

14,437

The
Company's income tax expense (benefit) at the statutory rate of 34% was
substantially equal to the reported income tax expense (benefit). The
Company is only subject to federal income taxes.

At
December 31, 2009, the Company's net deferred tax asset consisted of the
following:

Net
operating loss carryforward

$

656,845

Less
valuation allowance

(656,845

)

Total

$

-

At
December 31, 2008, the Company had no deferred tax asset or related valuation
allowance.

The
Company's net operating loss carryforward for federal income tax purposes was
approximately $1,932,868 as of December 31, 2009, expiring in 2022. In
accordance with Internal Revenue Code Section 382, the Company may be limited in
its ability to recognize the benefit of future net operating loss
carry-forwards. Consequently, the Company did not recognize a benefit from
operating loss carry-forwards.

NOTE
L – COMMITMENTS AND CONTINGENCIES

Leases

The
Company is obligated under a non-cancelable operating lease for its primary
office facilities, which expires on February 28, 2015. Future minimum lease
payments under this operating lease as of December 31, 2009 are $247,456,
payable at the rate of $61,864 per year through 2013, and $41,243 in
2014.

Rent
expense for these operating leases (net of a month-to-month sublease for a small
portion of the primary office premises) for the years ended December 31, 2009
and 2008 was $70,727 and $52,599, respectively.

Consulting
Agreements

See Note
G for a discussion of the Consulting Services Agreement with iTella, Inc. and
the Consulting Agreement with Mr. Warren Gilbert.

NOTE
M – SUBSEQUENT EVENTS

On March 18, 2010, the Company executed
an Unsecured Revolving Promissory Note (the "Unsecured Note") payable to Mr.
Steven Ivester, the Company's former sole shareholder and currently a consultant
to the Company, in the maximum amount of $1,000,000. The advances under the
Unsecured Note are repayable upon demand and are non-interest bearing. The
Unsecured Note documents the advances Mr. Ivester previously made to the
Company, which advances amounted to $758,781 as of December 31,
2009.

On February 27, 2010, the Company
executed a $1,000,000 Senior Secured Promissory Note payable to Gilder Funding
Corp, a company controlled by Mr. Warren Gilbert (the “Secured Note”) for
cash. The proceeds were used to repay the $200,000 note payable to
Mr. Gilbert referred to in Note H, plus accrued interest. Interest on
the Secured Note is payable monthly at 15% per annum beginning April 5, 2010,
with the principal and any unpaid interest due on or before February 27, 2016.
The Note is secured by substantially all of the Company’s
assets.

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